Seasonal Trends Back in Focus

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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In mid-February, July hog futures were trading around $106/cwt, which would imply a cutout value of anywhere between $112 and $115. At the time, pricing wholesale pork (cutout) for July at such levels was not much of a stretch, considering that the pork cutout in mid-February had already surpassed $100/cwt (see chart). But, as has been the case in previous years (see 2022 and 2023), wholesale prices in April stalled. Add to this the uncertainty about tariffs, and futures scaled back summer price expectations. Now, however, summer prices are back on track, and so are futures. Slaughter is now below 2.4M head/week, limiting overall supply and pressuring prices higher. The pork cutout on Friday closed at $118/cwt, almost $17/cwt higher than a year ago. Most of the year-over-year gains have been driven by processing items, namely bellies and hams. The value of the belly primal on Friday was 184/cwt, up 36% from a year ago and contributing about half of the overall increase. The value of the ham primal, at $114/cwt, was 37% higher than last year, contributing almost as much as bellies.

Impact of Hog Supply Decline on Processing Items

Processors need to run production, and the seasonal decline in supply tends to have a significant impact on spot availability. This is particularly the case when cold storage inventories are insufficient to smooth out the variability (belly inventory on May 1 was –22% y/y). Hog slaughter last week was estimated at 2.363 million head, but that figure was later revised even lower to 2.355 million, 2.5% below the same week last year. More importantly, hog slaughter has averaged 2.312 million head per week over the last four weeks, including a holiday-shortened week. Weekly slaughter averaged 2.466 million head in March and 2.442 million in April. Also worth noting is that official USDA hog slaughter estimates have consistently come in below initial projections. In April and May, the official estimates were, on average, 7,300 head per week below the initial forecast, evidence that supply availability has been tighter than expected. In a couple of weeks, we’ll get the results of the June hog inventory survey, but based on the March data, it’s unlikely that weekly slaughter will exceed 2.4 million head again until mid to late August (see chart). The March survey pegged the inventory of hogs expected to come to market in late spring and summer slightly below last year’s levels (–0.3%).

Lower Weights Add to Supply Pressures, Normal for This Time of Year

The mandatory price reporting system (which in our view is more accurate than the initial USDA trend estimates) shows that last week the average weight of barrows and gilts was 214.6 pounds (dressed weight), 0.7% lower than a year ago. Weights are down about 1.4% since late March and early April, amplifying the impact of lower slaughter. This is not a surprise—it happens nearly every year. And yet, it remains a factor that the market often struggles to fully assess in early spring. What has been particularly interesting this year is that packer-owned hog weights are down 1.8% year-over-year, implying that packers are having a harder time sourcing hogs on the open market and are being forced to schedule their own hogs earlier than they would likely prefer.

Price Chart

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