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With little improvement in the spot pork market, hog futures continue to slump. But risks are increasing that the market has overshot its mark and prices may snap back.
Lean hog futures have declined by more than 10% in the last few days due to ongoing demand uncertainty this spring.
Pork cutout futures continue to signal lower wholesale prices for the spring and summer as demand eases lower following the COVID-related spike in 2021 and 2022.
Hog slaughter was lower last week as snowstorms disrupted the transportation of hogs to processing facilities. U.S. hog producers are still incentivized to pull hogs forward as current prices are below the cost of production.
The pork market continues to trade sideways on ample supply and, more importantly, a weaker than expected demand across a range of items.
Despite 2% decline in slaughter anticipated by the USDA, pork supply coming to market continues to be far higher that expected.
Hog slaughter was near 2.7 million head last week as producers sought to schedule hogs that were backed up due to winter storms and holidays. Slaughter is expected to be lower this coming week, in part because some plants will be dark on Monday for MLK holiday.
USDA hog inventory survey suggests that hog slaughter will be down 2% y/y through May, but then increase about 1% to 1.5% for the summer months. The increase in the breeding herd and more pigs per litter should increase supplies in the second half of 2023.
Slaughter is at annual highs, while retail demand for fresh pork has yet to kick in. Ham prices have eased as Christmas orders have been filled.
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