Hog Futures Remain Volatile Even as Product Prices Hold Firm – Why the Disconnect?

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The chart below speaks for itself. On Friday, the April lean hog futures contract settled at a little over $87/cwt, close to where it was at the start of the year. However, during this period, futures have fluctuated between a high of $95/cwt and a low of $82/cwt, with approximately eight moves of +/- 5%. Tariffs have clearly been a factor, but so has the outlook for pork supplies in Q1.

Regarding tariffs, the new administration has consistently (perhaps intentionally) kept the market guessing, which has not been helpful. A few highlights:

• Jan 20: President Trump, in his inaugural address, emphasized the use of economic measures such as tariffs to strengthen the U.S. position.

• Jan 23: At Davos, Trump warned international businesses to invest in the U.S. or face tariffs.

• Jan 31: The U.S. government announced a 25% tariff on all imports from Canada and Mexico, with lower tariffs for energy.

• Feb 3: Tariffs on Mexico and Canada were paused for one month.

• Feb 10: A 25% tariff on all steel and aluminum was set to take effect on March 12.

• Feb 13: A memo was sent to various U.S. agencies requesting reports on imposing reciprocal tariffs, with a deadline of April 2.

• Feb 26: The U.S. announced its intention to impose a 25% tariff on EU imports.

• Mar 4: Tariffs on Mexico and Canada went into effect.

• Mar 6: A partial rollback of the 25% tariff on Mexican goods covered by the USMCA was announced.

• Mar 7: Reciprocal tariffs were imposed on Canadian dairy and lumber.

Meat markets are difficult to navigate on a good day. The mixed messages coming from the new administration have often resulted in market paralysis, with buyers and traders operating on a day-to-day basis. We believe this has limited the ability to plan.

At the same time, some reports indicate that near-term pork sales have been robust. Retail pork prices have remained generally stable and competitive with beef and chicken. Meanwhile, the weekly supply of pork coming to market has fallen short of expectations. Last week, hog slaughter was estimated at 2.418 million head—120,000 head (-4.7%) lower than the previous week and 1% lower than the same period last year. Since mid-January, weekly hog slaughter has been 576,000 head (-2.8%) lower than a year ago, well below projections from the USDA’s December Hogs and Pigs report.

That report estimated the inventory of hogs between 120–179 lbs. to be down just 0.6% year-over-year, while the 50–119 lb. market hog group was projected to be 1.4% above the previous year. By now, we should be processing those market hogs, but supply remains limited.

In the near term, tight pork supply has supported overall cutout values. Until we see evidence to the contrary, our working assumption is that hog supply will remain limited through spring and early summer. Additionally, we believe the U.S. and Mexico will avoid a trade war—both countries have too much to lose, and the U.S. administration needs Mexico’s cooperation on immigration and fentanyl. Mexico, on the other hand, relies on exports to the U.S. for 25% of its GDP.

However, the U.S. is likely to take a harder line with Canada, which could negatively impact the flow of hogs into the U.S., potentially exacerbating the already tight hog supply. In the longer term, a broader trade war would be detrimental to the U.S. pork industry, opening the door for competitors to gain ground in key U.S. export markets.

Pork Trade – Trade Storms Gather

Matching last year’s U.S. pork export volume will be challenging. The USDA still expects exports to increase in 2025, forecasting a 2.5% rise. However, it’s important to note that the USDA does not account for potential trade disruptions until they become reality.

The start of the year has not been particularly encouraging, especially considering that looming tariffs may have prompted some demand to be pulled forward. Mexico remained the top market for U.S. pork, with shipments totaling 90,189 MT—3.2% higher than a year ago.

Exports to China also increased, but it remains to be seen how long that trend will continue now that the effective tariff on U.S. pork in China stands at 47% (37% plus the newly imposed 10% retaliatory tariff). The rise in shipments to China helped offset a decline in exports to Japan.

Once the leading market for U.S. pork, Japan has lost ground in recent years due to increased competition from Europe, a weaker yen, and slowing consumption. U.S. pork exports—fresh, frozen, and cooked—totaled 21,833 MT, down 21.4% from a year ago.

Although Canada often receives less attention, January shipments there exceeded those to China, reaching 13,387 MT. However, exports to Canada declined by 11% year-over-year, and with the suspension of Smithfield’s Tar Heel plant and the potential for new tariffs on U.S. pork, shipments to this market are expected to decline further in the coming months.

Beyond tariffs, sentiment toward American products in Canada is another factor to consider. As a net exporter of pork, Canada is likely to push for increased domestic sourcing, further weighing on U.S. export prospects.

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