Steiner and Company produces the Profit Maximizer report on behalf of National Pork Board 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.

Highlights

  • Last week hog slaughter was 2.56 million head compared to near 2.7 million for the comparable week a year ago. In the last three weeks, slaughter has been down by almost 500k head y/y. This has significantly impacted spot supply.
  • Not all pork prices are flying high. Retail business for fresh pork has been ok but not as good as some other proteins. Loins have been available and so have been picnics and pork butts. Export availability has not been as good because of the lack of freezer space/higher freezing costs, however.
  • Holidays usually support demand for hams. The timing this year is a bit different as well, giving processors another full week before the holidays. Combined with the lower slaughter, it has pushed up ham prices above $100/cwt.
  • Feeder pig supply is tight. The lower breeding herd has likely limited pig supplies. There has also been more disease pressure, further limiting availability, pressuring prices up.

Full Report

Hog slaughter typically peaks in Q4, with the highest weekly slaughter occurring in the two weeks after Thanksgiving. This seasonal trend reflects the impact of the holiday, which limits slaughter capacity during the heaviest supply period of the year. Producers must then market hogs more aggressively before another holiday slowdown in the latter half of December.

To say this year has been surprising is an understatement. The September Hogs and Pigs report projected a supply increase of hogs likely to come to market between September and November, ranging from 2% (based on the March–May pig crop) to 4% (based on the market hog inventory as of September 1). However, weekly slaughter during this period was slightly lower than a year ago.

In the two weeks following Thanksgiving, hog slaughter totaled 2.602 million and 2.560 million head, representing year-over-year declines of 2.5% and 5.0%, respectively. Additionally, hog weights, which had been running higher year-over-year during the spring and summer, have since flattened and are now at the same level as a year ago.

This supply shortfall has supported the pork cutout overall, but it has had a particularly pronounced impact on items with very inelastic near-term demand, such as hams and trimmings. The timing of the holidays this year may have also played a role, as processors sought to maintain production to meet immediate needs but encountered an extremely tight spot supply. The volume of 23–27 lb. hams traded on the open market last week was 45% lower than a year ago.

We expect ham prices to decline over the next two weeks, partly because Christmas demand will be behind us and partly due to reduced processor schedules. Mexican and export buyers have also begun to pull back. Pork trimming prices have followed a similar trajectory and are likely to ease as well.

Compressed Packer Margins

Pork packer margins were compressed over the past couple of weeks, so it’s no surprise that they limited slaughter, particularly Saturday slaughter. Last week’s Saturday slaughter was 150,000 head—half of what it was during the same week a year ago. The reduced slaughter helped clean up spot supplies and bolstered prices, especially for last-minute holiday items like hams. With lower slaughter levels ahead, packers are aiming to bring margins back in line.

However, not everything is rosy in the pork complex, despite the buzz about strong demand. The loin primal was down year-over-year, even as overall pork supplies declined 5% compared to last year. Will high prices for chicken breasts and ground beef prompt consumers to add more pork chops to their shopping carts? Maybe, but it’s far from guaranteed.

Price Chart

Forecasts

Steiner Consulting Group 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.