Lower Supply, Higher Price of Competing Proteins Underpins Wholesale Pork Price in the Near Term

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Hog slaughter in the last three reported weeks was 8%, 4.9%, and 3.3% lower than a year ago, respectively. Does this recent shortfall mean the December Hogs and Pigs report was inaccurate? Maybe—especially if slaughter does not pick up in the next four weeks.

During the four December weeks and the first two weeks of January, hog slaughter totaled 14.617 million head, 0.4% higher than a year ago. The hog survey estimated the inventory of +180-pound market hogs at 13.757 million, 0.5% lower than the previous year. However, weekly hog slaughter in the second half of January and through February 8 (four weeks) was 10.198 million head, 434K head (-4.1%) lower than the same period last year. The December survey pegged the inventory of 120-179-pound hogs at 14.824 million, down 0.6%.

Since the first week of December, hog slaughter based on weekly data (for the same number of weeks) is down 1.5%—almost a full percentage point lower than the survey indicated.  The shortfall in slaughter has impacted spot availability, with some items, such as bellies, being particularly sensitive. On Friday, the pork cutout was $97/cwt, 13% higher than a year ago. The belly primal value, at $165/cwt, was 37% higher than a year ago, contributing almost two-thirds of the overall increase in the pork cutout.

Tariffs Delayed, Not Gone

There was some hope that a deal on tariffs with Mexico and Canada was within reach, as all parties involved spoke positively about the negotiations and delayed any tariffs to allow time for an agreement. However, with only two weeks remaining until the second deadline expires, little progress has been made. More importantly, President Trump has ordered a 25% tariff on steel and aluminum imports. Canada, as the largest supplier of these two metals to the U.S. market, is particularly affected. Tariffs and their related impacts will not disappear overnight, making it crucial to consider their potential effects on the pork industry.

We often see a lot of numbers thrown around in articles, typically to highlight specific points. To provide a clearer picture, we thought it would be useful to compile all relevant figures in one place. To see the data sheet download the full report. The goal is to better understand the role of Mexico and Canada in the U.S. hog and pork supply. As for price impacts, it is difficult to predict given the current uncertainty.

It is also important to distinguish between short-term and long-term effects, depending on how the tariff dispute unfolds. For example, a significant number of feeder pigs are imported from Canada, many originating from sow barns in Manitoba. Since feed and labor costs are lower in the U.S., Canadian producers have specialized in breeding pigs and selling feeder pigs to American buyers. If the U.S. imposes a 25% tariff, what options do these producers have? It is not guaranteed that they can simply pass the additional costs on to their U.S. customers. Canada lacks the capacity to feed all those pigs, meaning producers will likely take a financial hit. However, if demand remains strong, customers may agree to share some of the cost burden.

With a 25% increase in costs, some Canadian producers may choose to scale back production, exit the business, or renegotiate pricing with their customers before the next breeding cycle. Eventually, prices will adjust to reflect the added tax burden. However, in the short term, the impact on prices may be muted and distributed across the supply chain.

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