Look Past the Seasonal Bump in Supply and Plan for Easter Needs Today

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.

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USDA has yet to go back and update some of the production statistics for September and October. It will probably take some time to sift through the inspector reports but in the meantime USDA continues to provide preliminary estimates based on what plants are running and the number of shifts planned. Last week, the preliminary estimate put hog slaughter at 2.701 million head, about 70k head more than the previous week and the highest weekly slaughter so far this year. Indeed, you have to go back to late 2020 and early 2021 to find a weekly slaughter above this level. Where did all these extra hogs come from? We suspect that robust profits in Sep/Oct continued to incentivize producers to slow down the marketing pace. If a producer is making money on every load they sell, why would they be pushing to market those hogs early. Hog carcass weights tend to confirm this theory. Weights on producer owned hogs in mid August were around 210 pounds per carcass, about the same as a year ago. By the end of October, weights were nearing 218 pounds, almost 2% higher than a year ago.

In the near term the seasonal supply increase is pressuring prices lower. This happens most years in the fall and 2025 is no different. Futures prices put significant premiums on Oct/Dec prices based on the trend observed during the summer months. Little heed was paid to the seasonal uptick in supply. Spec funds at the end of September, before the government shutdown stopped the data flow, held significant net long positions. We still don’t know what the spec position is but it is quite likely that long position has been curtailed significantly in recent weeks.

Implications for Product Prices, Especially Easter Ham Business

The pork cutout chart includes a price trend based on the values established during the summer months. If the cutout continued on that trend, including some seasonal decline, then the pork cutout by early December was expected to be close to $100/cwt. Futures appeared to trade on that basis as December hog futures were priced around $91/cwt. However, as the cutout value has been diverging from that trend, so have market expectations for prices. Last year, the pork cutout bottomed out at around $90/cwt in early December. Cash hog prices, on the other hand, are about $8/cwt lower than last year. The combination of the two (cutout and cash hogs determine the index that futures settle to) has December hogs now trading under $80/cwt, a 13% pullback from what futures were indicating in September.

Should end users count on product prices to also be down by double digits, be this in December or in Q1? We think that would be a mistake. Part of the reason for futures coming back to earth is because producers fell behind in their marketings and now are rushing to get caught up, which is difficult due to the holiday disruptions. More hogs are showing up and by now retailers have already ended their merchandising plans for holiday hams. Indeed, the pullback in ham values has been a critical factor. Ham prices were holding over $100/cwt through September and the expectation was for prices to hover around those levels through Thanksgiving, similar to what we saw in 2022. Current low prices, however, will dictate sales/pricing for Easter.

Normally, ham prices find a bottom right after Christmas, but not always. Last year, for instance, ham prices rebounded in December. For retailers, with ham prices in the low 80s, this might be a good time to start working on their Easter plans. February hog futures are under $80/cwt, which could also allow suppliers to hedge some of their risk exposure. What end users should keep in mind is that what seasonal supply gives it also takes away. Ham prices have come under pressure with slaughter at 2.7 million and Thanskgving and many Christmas buys already closed. Hog slaughter during full production weeks in Jan/Feb of this year averaged around 2.533 million head. The September ‘Hogs and Pigs’ survey noted that the Jun-Aug pig crop, i.e. pigs that will be available for marketings during Dec-Feb, were down around 2.5% from the previous year. If the survey results are anywhere close to being true, then it would be reasonable to expect slaughter during key Easter ham production weeks to be at or below 2.48 million head/week.

Exports are always a key factor for hams and sharply higher prices during the summer negatively impacted export sales this fall. Mexico will continue to buy but in other markets US producers are finding more competition from Brazil. EU also has been negatively impacted by both tariffs and demand slack in China, so it is pricing product aggressively in a number of Asian markets. That worked against US pork during summer and early fall when US prices were flying high. But now, as US pork becomes more competitive, we could see export interest pick up again. For end users, especially focusing on Easter needs, this is another reason to stay in front rather than hope prices will continue to drift lower.

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