U.S. Continues with Fewer and Lighter Market Hogs

Pork Commentary
Jim Long President-CEO Genesus Inc.
November 21, 2022

U.S. hog marketing continues to run lower than a year ago. This past week 2,605,000, the same week a year ago 2,632,000 (YTD -2.9%). Maybe more significantly Iowa – S. Minnesota hog weights averaged 283.8 lbs., a year ago 290.3 lbs. – that’s 6.5 lbs. lower year over year. Maybe 1 million hogs have gone to market ahead of last year’s pace. You only market them once.

The lower weights are probably a reflection of higher feed costs, producers shipping aggressively for cash flow, and trying to get ahead of the lower December market. Packers willing to buy hogs is a reflection of solid domestic demand in the face of what has been a challenging pork export market.

Other Observations 

  • Hog price is in the high 80s, a year ago lean hogs were below 60¢ lb. ($40 per head difference). It wasn’t before March of this year that hogs reached the high 80s. A reflection of current demand relative to supply.

  • Hams are helping hold prices. Hams closed Friday at $1.03 lb., a year ago they were 75¢ lb. When Hams make up about 25% of the carcass this is helping hog prices relative to a year ago. Ham demand is being helped by Avian Flu decimating Turkey supply leading to Pork Ham consumer substitution and strong demand from Mexico. Last week 60% of U.S. Pork Exports sales were to Mexico.

  • Avian Flu is continuing to hit poultry hard. Over 50 million birds of all types have been exterminated. This has cut the poultry meat and egg supply. Combined Regional Large Weekly Average Prices – $3.30/dozen, a year ago 90¢/dozen. It appears that you can keep Avian Flu out of your layer flock egg business a lot better than a year ago. The average cost of frozen Turkey this year is $1.46 lb., and last year $1.15 lb. Less Turkeys + demand = higher prices. Turkey – $1.46 lb. – Pork Hams $1.05 lb.

  • Cash early wean pigs have started their usual seasonal increase. A few weeks ago, they were $30, this past Friday the USDA data indicated last week’s average cash price was $41.90. A year ago, same time they were $51. We expect continual price increases next couple of months. Some have predicted to us over $70 plus. With less sows in the USA than a year ago, we expect demand will be strong.

  • We have written continually since last October that the EU would have major sow liquidation of up to 10% of the sow herd (I.E., 1 million sows). Last week Statistic Denmark released data that shows major liquidation in their country. 11.9 million pigs in inventory. Down 10% from a year ago. Sow herd is down 9% from a year ago at 939,000. All these numbers are a reflection of the financial losses incurred in the Danish industry (EU industry). The sow herd was down 3% last quarter a reflection to us that liquidation continues. Since its peak 2 years ago the Danish sow herd has decreased by 13%. One thing is for sure less sows = less pigs. There will be significantly fewer pigs in Europe in 2023 which will support local and export markets.

  • U.S. – Canada Packers have been having a real challenge to maintain profitability. A reflection of this reality is Tyson’s pork division third-quarter operating losses of $55 million. We don’t believe Tyson is an outlier it’s just that they are a public company and release its financial data. When we talk to Packers there is a general feeling “there’s no joy in Hogville”. We need not only need a financially strong production sector but also Packers to have a sustainable vibrant industry.

  • China’s national average hog price last week was 25.35 RMB/kg = $1.60 U.S. lb. liveweight. A 275 lb. market hog = $440 U.S. China early weans $83.11 U.S., 35 lb. feeder pigs $96.39. Strong prices are a reflection of demand and less hogs.

  • Last week Financial Post published an article on China. It was a repeated Pork business. We were quoted but some other quotes included:

“The elimination of sow production capacity may be larger than the current market imagined,” said Guan Yilin, analyst at Cofco Futures. (Cofco is either the first or second largest importer of Pork to China).

“The reported total number of sows is inflated,” said Zou Zhihong, China manager of U.S. farm equipment supplier Hog Slat Inc. (One of the world’s leading Swine Equipment and building companies).

“A lot of barns are still empty,” he said.

“If there were so many pigs, the price couldn’t reach this year’s dramatic level,” said Xiao Lin, analyst at Huachuang Securities.

“I expect more shipments to arrive in Q4,” said Pan Chenjun, senior analyst at Rabobank, adding that 2023 imports will be higher than 2022. 

Link to the Article:

We stated early last fall reporting the massive sow liquidation ongoing in China. We were kind of a small voice in the wilderness but it seems liquidation did happen. China hog prices are extremely high a reflection of that liquidation. Even Rabobank now thinks there will be more pork imports. With less pork now in the USA and Europe. We expect the reality of China’s increased imports will rocket charge EU – USA prices. No doubt in our mind U.S. hog prices will surpass $1.20 lb. this coming summer. Crazy not to think so as we passed $1.20 the past two summers. Now fewer hogs in EU – USA and demand will be in China the world’s largest importer of Pork. U.S. summer lean hog futures at $1.05 lb. are significantly undervalued in our opinion compared to where the market will end up.

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Link to Jersey Red Duroc – Pork Chop video: