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Supply recovery after short Easter production is limited, with weekly slaughter expected to settle around ~2.4 million head into Memorial Day, 100k head less than March levels.
Fresh pork appears to be in a better position, with loin, butt and rib prices well above year ago. High beef prices are expected to drive more retail features in Q2.
Processed items are largely following the seasonal trend although ham values are expected to have more upside price risk as processors work to fill Easter orders. With Easter a bit earlier this year, the peak in the ham market is expected sometime in the first two weeks of March.
Hog supplies are behaving largely as USDA projected, with slaughter front-loaded into December and early January, up about 2.8% y/y, and a seasonal slowdown now expected into mid-February as the backlog clears.
Despite USDA data pointing to higher hog slaughter and heavier weights in both spring and summer, pork cutout values have held above year-ago levels, signaling demand strong enough to absorb additional supply.
Producers are looking to get more current following two short production weeks during the holidays. Packer margins have been robust, thus supporting higher Saturday slaughter. Spot supply has improved considerably.
The results of the quarterly survey came in outside the high range of expectations. However, there is plenty of uncertainty about future supply as expectations for growth largely hinge on productivity improvements. Breeding herd on December 1 was still 0.9% lower than a year ago, which will tend to cap growth this winter.
Hog slaughter last week was at the highest point in five years. Robust packer margins and the need to ramp up production ahead of short holiday weeks contributed to the uptick.
As expected slaughter was down about 300k head from the previous week with plants closed for Thanksgiving. The decline in slaughter and meat processing plants returning to full production schedules next week should push up prices next week, particularly hams but also loins and butts.
Hog slaughter last week was around 15,000 head less than initially expected, in part due to plants doing maintenance work ahead of the holidays. Expectation is for slaughter to continue to run near 2.6 million head/week through mid-December but then trend lower into January.
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