Pork Supply Situation: Low Inventories and Rising Demand Fuel Price Swings

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There have been some notable swings in hog futures, with June hogs for instance as high as $112 in early February, then down to $104 a week later and currently back to trading at $110.  Other contracts have experienced similar swings. What accounts for the volatility? In our view there is a lot of uncertainty about supply going into the spring and summer. Producers look to be current and willing to hang on to their supply, with the cash price recently as high as $91/cwt, $2 higher than a year ago. Robust consumer demand, especially considering escalating beef prices, is also viewed as a factor that could bolster fresh wholesale pork values in the spring.

Disease impacts (PRRS and PEDv) continue to be discussed and remain a critical risk for packers and end users this spring and summer.  Tracking data shows that PRRS remains a persistent issue that producers have to contend with each year. This year, however, there appears to be a higher incidence of PEDv cases. The fact that Alberta confirmed its first PEDv cases since 2022 would point to a more widespread issue than in the past.

The December survey pegged the pig crop for Sep-Nov at 34.998 million head, 0.4% higher than a year ago. However, as we look at the breakout of the market hog supply, which would roughly correspond to this pig crop, there is an expectation that at least through March and early April, slaughter is expected to be lower than a year ago. Weekly hog slaughter between mid January through the end of last week was 15.139 million head, 0.4% lower than a year ago.  By comparison, the inventory of hogs 120-179 pounds was estimated 0.6% higher than a year ago.  The 1% swing in actual numbers vs. expectations is significant. What’s more significant, however, is if the numbers continue to track below the survey going into spring.  The inventory of hogs 50-119 pounds was estimated at 19 million head, 0.9% lower than a year ago. Last year weekly slaughter between late Feb-early Apr averaged 2.46M/wk.  If the survey was right, this year it would be 2.44 and given recent performance potentially even lower. Hence the short lived pullback driven by spec fears, with the supply risk once again at the forefront.

Pork in Cold Storage

Total pork inventories moved higher from December to January, but the increase was noticeably smaller than what we typically see this time of year. Even with the monthly build, stocks remain near the very bottom of the 25 year range, which continues to frame the broader supply picture as historically tight.

At the end of January, total pork in cold storage stood at 410.4 million pounds. That is 0.8% above a year ago, but still 10.1% below the five-year average. Inventories rose 6.1% from December, roughly half of the long run January increase of around 12%, reinforcing the idea that supplies are building, just not at a normal seasonal pace.

Ham inventories were one of the few categories showing more comfortable supply. Stocks at the end of January were 6.2% higher than last year and 7.6% above the five year average. The 36.5% increase from December was right in line with the typical seasonal build, so nothing unusual there.

Belly inventories totaled 43.1 million pounds, up 3.2% from a year ago but still 13.9% below the five year average. The December to January build was 16%, slightly stronger than the 13% long run average. The pace of inventory accumulation from February through April will be important to watch, as it will help determine how much supply cushion we have heading into the summer pricing window.

Loin inventories came in at 32.1 million pounds, down 5.1% from last year and 19.5% below the five year average. Rib inventories were 85.9 million pounds, 2.3% above a year ago but 10.2% below the five year average. In both cases, the seasonal inventory build was below trend, which keeps overall availability relatively tight despite modest year over year increases in select categories.

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