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

  • Winter storms impacted slaughter operations and limited processing last week. The decline in slaughter impacted spot market availability towards the end of the week, pressuring prices higher across a range of products.
  • Belly prices on Friday had gained 10% from the previous week, reflecting the decline in slaughter. Last year we saw a similar increase in price due to supply disruptions but then prices normalized once slaughter numbers climbed over 2.6m/week.
  • Ham prices only saw a modest improvement. Spot supply is adequate despite the reduction in slaughter, suggesting overall demand, including export demand has slowed down. Sales to Mexico were also underwhelming. Easter is later than usual this year, which leaves more time for processors to accumulate inventory.
  • Loins have more upside price risk as beef prices spike.

Full Report

Tariff Talk Takes Center Stage

The presidential inauguration last week was followed by a flurry of executive orders. Notably absent, however, was any immediate action regarding tariffs—a decision that brought some relief to livestock futures. President Trump mentioned that a 25% tariff on Mexico and Canada could take effect on February 1, leaving room for negotiation in the meantime. What remains uncertain is how Mexico and Canada might respond to any U.S. tariffs. Through November, Mexico purchased 311 million pounds of beef (carcass weight), accounting for 11% of all U.S. beef exports, while Canada bought 232 million pounds, representing 8% of total beef exports.

The impact of tariffs on the pork/hog and chicken trade could be even more consequential. US imports of feeder pigs from Canada represent as much as 5% of US hog slaughter. Also, through November, U.S. pork exports to Mexico reached 2.412 billion pounds, making up 37% of all pork exports, with shipments to Canada totaling 485 million pounds, or 8% of the total. Mexico is also the top market for U.S. poultry: chicken exports to Mexico amounted to 1.48 billion pounds, a quarter of all U.S. chicken exports, and turkey exports reached 339 million pounds, representing 75% of all turkey shipments. At this time speculation is that food products will be excluded from any tariffs. This may have eased some of the concerns raised previously.

Weather Effects, Slaughter and Pork Cutout Trends

Hog slaughter was limited during three days last week, bringing total weekly slaughter below 2.5 million head (2.477 million). Extreme cold weather and winter storms in the Southeast were particularly impactful, disrupting operations at the largest processing plant in the country.

Similar weather events disrupted slaughter at the start of last year, creating a backlog that took three weeks to resolve. This led to increased market volatility, with higher prices in mid-January followed by a slump in February as slaughter surged above 2.6 million head. Market participants are closely monitoring whether a similar trend will develop this year. Will slaughter surge above 2.6 million next week, and if so, how will that affect the cutout?

Loin prices showed some improvement this week, largely due to the production shortfall. The same can be said for hams and bellies. For now, futures are trading sideways in the near term but continue to hold significant premiums for spring and summer.

In our view, an increase in PRRS (porcine reproductive and respiratory syndrome) cases, high beef prices, and limited freezer inventories present upside price risks for pork this spring and summer—risks reflected in our forecasts.

Pork Cold Storage Supply Remains Limited

The supply of pork in cold storage remains limited, which will impact export flows and pose increased risks for end users if spring supply comes in lower than expected.

Total pork in cold storage at the end of December was 400.4 million pounds, down 6.3% year-over-year and 12.1% below the five-year average. This inventory level is close to the levels seen in December 2021 and is near record lows.

Pork inventories increased by 2.4% compared to the previous month, a larger-than-normal increase, but this growth stems from an already very low base. Belly inventory at the end of December was 34.3 million pounds, 39% lower than last year, marking the lowest inventory of bellies since 2016. On a positive note, inventories increased by 52% compared to the previous month, a faster rate of growth than in previous years.

Ham inventory, at 68.6 million pounds, was 25% higher than a year ago. This is also the highest end-of-December inventory since 2019. Higher bone-in ham inventories should help temper price pressures in the very near term.

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.