Ham Market Rebounds. Is Fresh Pork Next?

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Just a few short weeks ago, ham market was in a tailspin. Bone-in 23-27# hams in mid-February were trading in the mid $80/cwt and were expected to be well supported given robust export orders and upcoming Easter. By the end of March, prices dropped to $70/cwt, a 17% decline. The collapse changed some of the expectations for ham values not just in the short term but also for much of spring and summer. That may have been a mistake.  The price pullback was short lived and validated what we though all along, namely that the end of buying for Easter needs plus larger than expected slaughter resulted in a short term glut in the spot market. But, as we argued back then, export buyers were likely to take advantage of this, especially with reports of disease losses potentially shortening supply later in the spring and summer.

On Friday, the value of 23-27# hams was over $96/cwt, a 36% increase from three weeks ago. In recent years these sharp moves in ham values, often due to increase in export activity, have been followed by a correction. However, the bigger picture is that overall demand, be this from exports or domestic processors, remains stable.

With slaughter expected to decline under 2.4 million head/week by June and weights pressured lower due to higher temps in the summer, we expect ham values to continue to trend higher.  Will they reach the levels we saw a year ago? While possible, we think it is more likely that prices trade under last year given our forecasts for slaughter and production to show some improvement y/y.  But the recent move is a reminder to not be swayed by short term moves in spot market.

The recent moves in the ham market should also prove instructive when considering the trend in the fresh pork market, be this for loins, hams or ribs.  Pork is more competitive with beef than it ever has been.  In the last four years, we have seen a notable uptick in pork prices in late spring and summer thanks to better retail merchandising. We expect that to be the case again this year.

Other Key Pork Items: Situation & Outlook

Pork loin prices have been trading sideways in the very near term.  Boneless loins have been range bound for much of the last three months but should trend higher in May/Jun as retail demand improves while slaughter seasonally declines.  Overall, however, pork loin supply is well balanced with level of demand for this item.

Pork butt prices are trading above levels a year ago and expectation is for prices to move higher in May with better seasonal demand and the normal pullback in slaughter.  So far expectations are for hog slaughter to be up less than half a percent vs. last year.

Picnic prices were slightly lower last week but the overall trend for this item is up and that is expected to continue in May and June.

Sparerib prices have turned higher, which is consistent with the seasonal trend for this time of year. High beef prices should continue to support rib values in Q2.

Pork belly prices were sharply lower last week, in part due to the sudden jump in slaughter over 2.5 million head. That is not the trend going forward and by late May slaughter will be closer to 2.4 million head. QSR demand has been uneven and could present some headwinds for bacon demand. However, current values should allow processors to book sales for later in May and June.

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Forecasts