The Profit Maximizer is a biweekly report that provides insights and analysis on current pork markets.
Steiner and Company produces the National Pork Board newsletter based on information we believe is accurate and reliable. However neither NPB nor Steiner and Company warrants or guarantees the accuracy of or accepts any liability for the data, opinions or recommendations expressed.
Futures have rallied the last two weeks as market participants now expect Q4 production to be less than previously thought. USDA ‘Hogs and Pigs’ survey suggested Sep-Nov slaughter could be up as much as 4% y/y. Instead slaughter since September 1 has been almost unchanged.
Our estimates are that the breeding herd on September 1 was down 2.5% from a year ago. The inventory of market hogs this fall should be adequate based on the pig crop last spring. Supply growth will be limited this winter and next spring as productivity is expected to return to trend and smaller herd limits farrowings.
Hog slaughter beat estimates at +2.3 million head, +3.6% above year ago levels. Expectations are for slaughter to ramp up in the coming weeks. Last year weekly slaughter between mid-September and early October averaged 2.57m head/wk. Given current growth trends, we could see weekly slaughter at or above 2.6 million in the coming weeks.
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• USDA revised pork production forecasts for 2022 by another 65 million pounds and now expects them to be 27.3 billion pounds. Last September, USDA was forecasting pork production for 2022 to be over 28 billion pounds.
• Hog slaughter showed some modest improvement last week, with slaughter gaining 2% from the previous week but still 4% lower than a year ago. The supply increase, and seasonally softer demand, helped keep pork prices in check.
• End users remain concerned about price inflation in Q2 and they are looking to take advantage of any price declines to bolster inventories. This continues to underpin prices in the near term and helps explain why prices for bellies and ribs continue to trade firm.
• The price of pork trim has eased a bit, in part because packers are doing more boning/trimming. As slaughter seasonally declines in May/Jun, prices are expected to trend higher.
• Ham prices should be near their seasonal peak ahead of Easter. We expect some modest downward pressure on bone-in ham values near term but higher prices in May/June.
• Russia is largely self sufficient in meat protein so the sanctions will likely have limited impact on global meat trade. However, Russia and Ukraine are key suppliers of grains, oilseeds and crude oil. Spike in cost of feed and fuel is inflationary for meat prices, especially less expensive protein like pork.
• Hog slaughter has shown some modest improvement but it still remains well below year ago levels. Lower slaughter remains supportive of both fresh pork and pork processing items.
• Belly prices are now at the highest point since last summer, in part because processors are now back working at full capacity but also due to uncertainty about supply availability later in the spring and summer.
• Ham prices remain volatile but good demand from Mexico continues to underpin prices for bone-in hams. Boneless ham prices were modestly lower later in the week. Seasonally ham prices peak in early March as processors get ready for Easter demand.
• The supply of pork in the freezer at the end of January was 6% lower than a year ago and 22% lower than the five year average. This remains supportive for prices in the near term.
• Hog and pork futures have jumped 25% in the last three weeks on speculation that hog supplies on the ground are much smaller than previously thought. Slaughter in the last 10 weeks has been about 350k head less than the USDA inventory numbers suggested.
• Concerns about tight supplies this spring and summer have belly processors looking to bolster inventories.
• Loin prices have seen the biggest gains recently, in part as retailers look to shift meat features to less expensive options. Ground beef and chicken have also benefited due to this.
• Ham market remains as volatile as ever. Packers do not have the labor to run ham boning/trimming lines five days a week. Depending on when they do run boning lines, ham primal value will sometimes vary by as much as 50%. Bone-in prices remain soft while boneless continues to trade firm.
• Pork market remains extremely volatile, in part reflecting the impact of COVID infections on worker availability. High prices for competing meats and uncertain export demand have made for a much more volatile market as well.
• Pork loin prices have seen a big surge as retailers are looking to feature inexpensive proteins. Sharply higher prices for ground beef and chicken breasts have made pork loins much more competitive in the meat case.
• Pork belly prices have also performed well and are expected to hold together for a bit longer. Processors are looking to bolster inventories in order to hedge their Q2 needs. Hog supplies are expected to be lower in late spring and summer and processors do not want to see a repeat of last year’s price spike.
• Talk of tight hog supplies, talk of disease losses and robust pork demand continues to support hog futures.
• Hog slaughter last week was about 100k head less than what we expected and 9% lower than the previous year. Packers continue to struggle with higher rates of absenteeism among workers and inspectors, limiting the amount of pork coming to market.
• Pork prices remain extremely volatile, with spot supply varying greatly depending on how much product packers are able to bone/trim in a given day. Ham primal value is a great example, with the value on Thursday jumping 50% from the previous day but then down 22% on Friday.
• Pork belly prices have improved in the last two weeks due to tighter supply and the need to start building inventories for the spring.
• The decline in slaughter and lack of boning/trimming has caused pork trim prices to jump sharply higher. We expect trim prices to ease a bit but higher prices likely in the spring.
• USDA’s “Hog Inventory” report for December indicated that pork supplies will remain tight, at least through spring and early summer. Weekly hog slaughter should be around 2.5M head per week in January and February compared to +2.6M head per week in December.
• Pork demand, especially export demand, remains critical, however. Exports to China have slowed down considerably but exports to Mexico continue to run 15-20% above year ago levels.
• Domestic demand has been exceptional and it is expected to remain on a strong footing considering the high price of competing proteins and broader inflationary trends in the economy.
• High feed costs, labor issues and compliance requirements of the California Proposition 12 mandate have caused producers to reduce the breeding herd by 5.7% since 2019.
• Operational issues impacted slaughter again last week although packers seemed to make up some of the shortfall on Friday and Saturday.
• The increase in production towards the end of the week put some downward pressure on prices but that will be short lived. Two holiday shortened weeks will limit the supply of pork coming to market and help bolster prices, especially for product going to retail.
• Ham prices are usually weak in the second half of December as seasonal demand comes to an end. But processors resume normal operations and export business picks up, ham values should find some support by mid January.
• Pork belly prices are expected to be steady to lower in the near term as processing plants run holiday shifts. Prices should recover in January as production returns to normal.
• Slaughter bounced back following the holiday shortened week and hit the highest level in 10 months. The increase in slaughter combined with hog weights that are approaching last year has helped pressure lower prices across a range of pork products.
• Bone-in ham prices are weak despite continued strong demand from Mexico. Normally bone-in prices find a bottom in late December. We expect export demand from Mexico to remain strong going at the start of the New Year.
• Pork belly prices were lower during the week of Thanksgiving as processors ran reduced production schedules. Now that they are back to full production prices have been trending higher. Hog slaughter will be lower in January and February and we think this will continue to support higher belly prices.
• Pork trim market should find a bottom in late December.
• Hog slaughter last week reached 2.635 million head, the highest weekly slaughter since early March. Hog carcass weights have also increased by almost five pounds in the last six weeks, adding to supply availability in the spot market.
• The seasonal increase in supply comes at a time when pork processors are looking to give their workers time off for the holidays. Processing items, such as hams and bellies, have seen significant downward price pressure due to this.
• Pork loin prices have also trended lower as retailers fill the meat case with holiday items. Loins and pork shoulder remain above year ago levels but price performance varies greatly depending on the amount of labor needed to trim/bone a specific cut.
• Pork export sales to China remain limited but shipments to Mexico have helped offset the demand loss, making Mexico by far the largest pork export destination.
• Wholesale pork prices continue to perform well as packers struggle to run full shifts. In the near term this is putting downward pressure on cash hog prices but bolstering the value of the pork cutout.
• Pork belly prices are expected to drift lower into the end of the year but prices should remain significantly above last year due to lower production, limited freezer inventories and ongoing concern about future inflation.
• Ham market has been a roller coaster. Buyers exporting product to Mexico were once again very active last week, with net sales over 18,500 MT, 58% higher than the average of the previous four weeks. We expect bone-in ham prices to firm up in the near term on export and seasonal demand.
• USDA reported a big quantity of pork trim sold to export last week as well, which we think went to South America. Pork trim prices remain firm.Please see the rest of the document for our detailed price summary as well as our forecasts for the next six months.
• The supply of pork in cold storage at the end of September was 466.4 million pounds, only slightly higher than a year ago and 20% lower than a year ago.
• Sow slaughter has declined in each of the last six months, suggesting that the breeding herd liquidation that started in early 2020 may have come to an end.
• Pork slaughter continues to run about 3% below last year but we think weights have increased at a faster pace than normal, bolstering production.
• There continues to be a wide disparity between bone-in and boneless products, reflecting the limited labor supply and high labor costs. Boneless ham prices are now trading about four times higher than the price of bone-in hams, when normally the multiple would be around two.
• Belly prices were also lower last week, which is not unusual for this time of year. Increasing pork supplies and a slowdown in retail demand tends to pressure belly prices this time of year. Belly freezer inventory at the end of September was the lowest on record, which will continue to support belly prices in the next three months.
• Pork trim prices have also pulled back due to softer seasonal demand and lower prices for competing products.
• Pork export volume down slightly in August even as exports to China are only half of what they were last year. Robust exports to Mexico have helped offset the loss of exports to China.
• Wholesale pork prices came under some pressure late in the week as weekly slaughter increased by 80k head from the previous week. However, we continue to see a big price spread between boneless and bone-in product. This is due to the additional labor needed to bone and trim muscle cuts.
• The price of 72CL pork trim has declined compared to summer, in part because slaughter currently is as much as 300k head higher than in July and August. However, fat pork trim prices remain historically high as packers are not trimming as much product as they used to.
• Pork exports in August were only slightly lower than a year ago even as exports to China have been cut in half. So far, higher exports to Mexico have offset the decline in Chinese demand.
• Belly prices are expected to pull back in November while ham values will be volatile, reflecting weekly export demand.
• USDA quarterly inventory report suggests that pork supplies this winter will be much tighter than previously expected. According to the report, the pig crop during Jun-Aug was 6% lower than the previous year. This implies a similar reduction in slaughter during the Dec-Feb period.
• Hog prices have been drifting lower in the last two weeks but pork cutout prices continue to be well supported by robust domestic and export demand.
• The supply of pork in cold storage at the end of August was 19% lower than the five year average. Pork demand is higher in Q4 and limited freezer stocks combined with lower than expected growth in supply should keep pork prices well above year ago levels.
• Pork belly prices have improved in the last two weeks, following the same path as a year ago. Prices for bone-in ham remain soft as packers struggle to find enough people to fully staff ham boning and trimming lines.
• Hog futures were sharply lower at the end of the week on concern about a slowdown in pork exports at a time when supplies seasonally increase.
• Pork trim prices have started to correct lower but they remain well above year ago levels. The price of 42CL pork trim has been cut roughly in half in the last four weeks and yet prices are double the five-year average.
• Ham prices remain volatile, largely reflecting export demand and rising production. Bone-in ham prices have pulled back as slaughter increased in late August and is expected to be higher in the fall. Boneless ham prices, however, remain very firm as packers struggle to run ham boning/trim lines.
• Loin prices continue to be supported by the high price of beef/chicken. However, prices should ease lower as supply seasonally improves.
• Pork wholesale prices are expected to decline in the fall as supply increases. The big unknown is labor availability and the impact this has on the price spread of boneless and bone-in products. Already boneless hams are trading at a +3 multiple to bone-in product.
• The increase in slaughter and seasonal demand slowdown has resulted in lower prices for lean pork trim. However, due to limited trim operations, fat trim remains tight, at least in the near term, resulting in fat trim trading above lean. It’s easier to generate more lean by grinding cuts than fat.
• Pork belly prices have declined from record levels but remain high for this time of year. As slaughter picks trend higher in Sep/Oct, bellies should be cheaper.
• Loin prices have performed quite well thanks to high prices for competing products at retail. Seasonally, loin demand is good in Sep/Oct. Limited freezer stocks will also help.
• Hog futures have been volatile in the last two weeks as producers look to get some downside protection given the heightened risk from African swine fever (ASF). Funds are also less certain about the market and have tried to scale back their positions.
• There is a lot of conversation in the U.S. as to what happens if ASF enters Puerto Rico and if this will cause the United States to lose its ASF-free status. This presents significant risk for U.S. pork exports and prices.
• In the near term, pork prices remain very firm and are bolstered by retail demand going into the Labor Day weekend. Processors continue to have staffing problems, resulting in a big difference between boneless and bone-in product.
• Hog slaughter last week climbed over 2.4 million head and combined with the slowdown in exports to Mexico it resulted in significantly lower prices for bone-in hams. Boneless hams, however, remain firm.
• U.S. hog prices are currently significantly above hog prices in the EU and Canada, starting to impact demand for U.S. pork in the world market. China hog values are down as much as 60% from their peak, limiting demand in that market.
• Hog slaughter should be near annual lows, with slaughter last week a little over 2.3 million head. Scheduled maintenance work, summer holidays and seasonal decline in hog supplies have all contributed to the decline. However, we think by late August weekly slaughter will gain about 100,000 head and by early October it will be 300,000 head higher than this week.
• Light slaughter continues to keep product markets tight. Processors are caught short, in part because they have smaller freezer stocks but also because demand from retail and foodservice remains strong. Prices for processing items, bellies, hams, trim, should be at annual highs.
• Packers recognize the supply increase that is coming and were more aggressive in selling to export last week, with sales to Mexico topping 25,000 MT. However, sales to Asian markets remain weak, which may weigh on prices in the fall.
• In the last 10 years, beef retail prices have increased at a faster pace than the price of pork and poultry. June beef prices were 51% higher than the average beef retail price in 2011. Pork retail prices, on the other hand, were 19% higher than in June 2011, while poultry retail prices were up 22%.
• Hog slaughter last week was once again below 2.3 million head (2.280), the lowest non-holiday slaughter week this year.
• Pork supplies are limited in the near term due to the decline in slaughter as well as carcass weights at annual lows. The decline in production has helped prop up product prices, especially the price of processing items, such as hams, bellies and trim.
• Lower slaughter and weights have especially impacted prices for pork trim. Tight labor supplies continue to limit the number of trim lines that packers are able to run, further reducing supply.
• Pork belly prices should be firm in the very near term but beware the seasonal tendency for sharply lower prices in late August and September. China exports are sharply lower and could pressure prices lower in the fall.
• Breeding herd on June 1 was estimated 1.5% lower than the previous year, setting the stage for a lower y/y pig crop this summer and lower hog supplies later this year and in early 2022.
• Hog slaughter was sharply lower this week as packers sought to manage supply ahead of the long holiday weekend. Pork production will be constrained in the next few weeks due to seasonally lower supply and lower carcass weights.
• Some fresh pork items have pulled back, not that holiday demand has subsided. However, labor challenges remain present and continue to affect labor intensive items. Also, seasonally lower supply will continue to limit availability of some products.
• Ham market remains volatile and highly dependent on export demand. Mexico has become the top market for U.S. pork and continues to significantly impact ham market trends.
• Pork belly prices should see some support in July but the trend is expected to be lower in late August and September.
• Extreme volatility permeated the pork market last week as a number of products appear to be getting some pushback.
• Belly primal value declined 25% in one day but then managed to recover somewhat by Friday. While the spot market imbalance appears to have been rectified, the decline was a reminder of the potential price risk, especially as end users try to pass on price increases to the consumer.
• Fresh pork prices were very firm in the first two weeks of June thanks to big holiday weekend demand, better weather, pent up demand from COVID and increased traffic. But as grilling season demand starts to wane, we are seeing some weakness develop, especially for ribs, butts and even trim.
• Hog slaughter was big once again last week as packers are looking to fill 4th of July orders. Supplies will be tighter in July due to lower weights and an expected 70k/wk reduction in slaughter.
• Pork production declined 17% from the previous week because of the holiday shortened week as well as the cyber-attack on JBS.
• The decline in supply significantly impacted availability across the supply chain. Pork wholesale prices are now near the highest levels in a decade and lean hog futures closed at contract highs on Friday as spot supply remains limited.
• Ham prices have recovered following big product sales to Mexico in the last two weeks. Seasonally pork supplies decline in June and July due to lower slaughter and lighter carcass weights.
• Pork belly prices are trending higher yet again, in part because processors are getting ready for 4th of July business and higher retail features in July.
• Hog slaughter was higher than expected this past week as robust pork prices and modestly lower hog values incentivized packers to run larger slaughter schedules on Friday and Saturday.
• July futures were sharply higher, however, as market thinks packers are pulling some of the supply forward. There will be a lot of interest when USDA publishes its June ‘Hogs and Pigs’ inventory regarding the size of the breeding herd and supply availability in the summer and fall.
• Prices for bone-in hams have declined following a slowdown in export orders. Sales to Mexico are now well below the pace of export shipments. Prices for fresh pork, on the other hand, continue to be supported by holiday retail demand, especially butts and ribs.
• Belly prices have found some stability. Going forward, foodservice demand remains key for this item.
Hog producers remain current, pressuring hog values higher as packers compete to run full shifts.
• Packers continue to face a very tight hog market, with cash hog prices in some parts of the country as high as $125/cwt. Negative margins will force some packers to reduce slaughter, especially once they have filled orders for Memorial Day.
• Slaughter last week dropped to 2.4 million head and we think it will be lower again in the next two weeks. The reduction should continue to bolster prices for processing items, with hams, bellies and pork trim more vulnerable to price inflation this summer.
• Corn prices are now at the highest price since 2012 and the increase will negatively impact hog production decisions for next spring.
• Belly prices retreated recently but expectations are for prices to climb above $200/cwt in June and July. Mexico demand continues to underpin ham values.
Hog supplies remain tight, and packers continued to pay up last week to run full slaughter schedules.
• Pork demand remains very strong and by the end of the week the pork cutout closed at $113/cwt, 41% higher than two months ago.
• Pork belly prices are now 67% higher than two months ago as processors struggle to fill retail and foodservice orders. Limited freezer stocks have pushed more processors to try and buy in the spot market causing a sharp spike in prices.
• Other processing items, especially pork trim, remains high priced. Lower carcass weights, the decline in slaughter and robust exports have all contributed to limit the supply. Reopening of foodservice establishments, stadiums and seasonal retail demand has contributed to price inflation.
• Pork exports to Mexico remain very strong and last week sales jumped to over 23,000 MT, supporting ham prices.
Weather disruptions cause shortfall in supply, higher prices for a number of items.
• Pork prices last week remained elevated as packers sought to catch up on orders from the previous week.
• Processing items have seen the biggest price increases as demand for those items is very inelastic in the near term. Processors need to deliver against prior sales and with limited freezer stocks, they had no choice but to pay up. The pork cutout was up $14 in February and $11 of that increase was due to higher ham and belly prices.
• US pork freezer stocks at the start of February were down by more than 26% compared to the previous year. Inventory of pork bellies in the freezer was down 56%. Belly production is now going either into formula sales or accumulated in the freezer, with little available in the spot market. Spot trade of pork bellies in the last four weeks is down almost 60% from a year ago.
• Retail items are moving up but at a much slower pace.
Weather disruptions cause shortfall in supply, higher prices for a number of items.
• Hog slaughter down almost 7% compared to a year ago and now below year ago levels for the last four weeks.
• Pork supply no longer benefiting from heavier carcass weights. Average weight of producer owned barrows and gilts is now below year ago levels.
• Processing items continue to underpin wholesale market. Processors are in the midst of filling Easter ham orders and current disruptions and robust exports have limited the supply of product available in the spot market.
• Spot market pork loads are now down as much as 7% from a year ago.
• USDA early forecasts for 2021/22 indicate an increase in corn planted acres. However, corn prices unlikely to return to sub $4 levels given dry conditions and strong export demand.
Lean hog futures maintain premiums for the spring and summer on expectations of robust demand and lower slaughter.
• Poor weather conditions in Iowa caused some slaughter disruptions last week and yet overall slaughter was still over 2.6 million head. Hogs continue to come to market on the heavy side, which has bolstered pork supplies. Production last week was 1% higher than last year but 15% higher than two years ago.
• Good domestic demand and strong exports continue to underpin wholesale pork prices. The pork cutout is currently 13% higher than a year ago and 22% higher than two years ago, despite more pork coming to market each day.
• Ham primal value last week was 47% higher than it was in 2019. Mexico remains a big buyer, with USDA reporting shipments for the most current week over 18,000 MT.
• Pork inventory in cold storage as of January 1 was 30% smaller than a year ago and the inventory of hams was down 37%, both supportive of pork prices in the near term.
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