Ham Prices Firm for Now but Rest of the Complex Struggles

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So much for the weak Mexican Peso killing sales to that market. On May 18, it took less than 16.6 Mexican Peso to buy $1 worth of U.S. products. Following the shock results of the election, and market concerns about future fiscal policy, the Peso dropped sharply and by June 12, it took as much as $18.75 peso to buy the US dollar value. The currency decline effectively increased the price of U.S. products going to Mexico by more than 12%. Devaluation combined with the seasonal price increase for pork products, including hams, during the summer months was expected to significantly limit U.S. pork sales to the Mexican market. Instead, sales in three of the last four weeks have been some of the best this year.

Pork sales to Mexico for the week ending 6/6 were 14k MT. After a brief pullback for weekending 6/13, sales in the last two weeks of June were 20k MT and 35k MT, respectively. This pushed the four-week average to 18k MT/week, a level not seen since April. The higher sales to Mexico have helped bolster the value of bone-in hams as packers work to fill orders. Export sales slowed down in the latest reported week, but it will take some time for the market to adjust. For now, ham prices are one of the few positives in the pork complex as other pork items struggle to gain traction.

USDA expects more pork in 2024 and 2025: In its latest update USDA made only minor revisions to its supply forecasts. But that’s because USDA already was counting on higher pork production in the second half of the year. The June “Hogs and Pigs’ survey did little to change the outlook, at least for the remainder of the year. Total pork production at 28.154 billion pounds in 2024 is about 169 million pounds(+0.6%) higher than what was presented back in January and over 800 million pounds (+3%)higher than a year ago. Some of this is due to calendar differences and some due to more hogs/heavier weights than a year ago. USDA thinks next year pork will remain available, expected to be up 1.5%. Maybe cheap corn fixes everything but we can’t help but think about the 3% reduction in the breeding herd and the fact that pigs per litter growth eventually returns to trend(maybe as early as this summer).

Per capita pork availability for all of 2024 is currently pegged at 51 pounds per person, on are tail weight basis. At the end of 2023 was at 50.9, indicating that USDA pork forecasts have been especially good. As the chart above illustrates, their forecast of domestic per capita availability has been quite stable and USDA does not expect any significant changes in 2025. Indeed, as we look at the details of the supply/demand estimates published on Friday, it is clear that USDA somehow solves for a steady per capita supply by bolstering exports. Latest forecast has U.S. pork exports in 2024 at 7.247 billion for this year.

Pork exports Jan-May were up 6% and USDA has raised forecasts for all of2024 to match that pace. As for 2025, USDA thinks that exports will continue to take a big chunk of the growth in supply. And this underscores the problem with the pork market, you need those exports to clean up the spot market, otherwise much lower prices are needed to get domestic buyers to step in.

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