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

  • Hog futures have been volatile, in part due to rush of speculative interest in the last quarter of 2024. Market participants now are looking to see how well pork demand holds up to start the year.
  • The December USDA ‘Hogs and Pigs’ report suggested that pork supply should increase in the spring and summer. In the near term, however, availability is lower than last year, helping support product prices.
  • Ham prices generally decline after the holidays and this year is no different. But, it appears export buyers are wasting no time and looking to book hams at prices significantly lower than a year ago. For some markets, there is little time to waste in order to get frozen hams delivered in time for Easter. Big orders from Mexico last week.
  • S. Korea reacted to outbreak of FMD in Germany by suspending all imports. More demand could shift to US.

Full Report

Cutout Roller-Coaster

The pork cutout has experienced higher volatility over the last three weeks, significantly influencing how hog futures have traded. This is for good reason, as the value of the cutout now has a more direct impact on formula hogs than it did in the past. While money flow doesn’t determine the ultimate price of hogs or pork in the market—that is dictated by pork supply availability and consumer demand—it does influence short-term volatility. The recent influx of speculators into the market, followed by their swift exit, has heightened this volatility.

Managed Money and Decline in Open Interest

In early December, managed money funds held the largest net long position ever in lean hog futures. However, over the past three weeks, futures open interest has declined by almost 30,000 contracts. The February contract alone has seen a reduction of 47,000 contracts, with only a portion of this volume being rolled into future contracts. Late last week, the higher value of the cutout, combined with sharply higher prices for other commodities, appeared to have a knock-on effect on hog futures.

Seasonal (and Short-Term) Decline in Hams

A significant reason for the pullback in the cutout value at the end of the year and the start of 2025 is the decline in ham prices. On Friday, the cutout was $91.40/cwt, down nearly $6.00/cwt from its December 20 level. Most of this decline can be attributed to lower ham prices, which typically soften after Christmas but gradually recover as processors begin building inventories for Easter. Our expectation is for ham values to trend higher in February and especially March given that Easter is later than normal this year.

Pork Loins Offer Retail Opportunities for Feb/Mar

The more surprising development, however, has been the underperformance of pork loins in the new year. While it’s expected for hams to lose value post-Christmas, packers often rely on more affordable retail items like loins to fill the gap left by turkeys, hams, and rib roasts in the meat case. Reduced production during the holiday weeks, coupled with a traditional increase in retail promotions, should have supported loin values. Yet, loin primal values have declined by since December 20. Although this may not seem like a substantial drop, loin prices were expected to help offset the decline in ham values.

Loins Are Now Very Competitive vs. Beef and Chicken

Currently, strap-off boneless pork loins are trading at half the price of 81CL coarse ground beef—the lowest relative value for this time of year in 15 years. Additionally, the wholesale price of strap-off boneless loins is only slightly higher than that of boneless, skinless chicken breasts, compared to a 1.55 multiple at the same time last year. The hope was that high prices for other proteins, such as beef and chicken, would bolster fresh pork sales. Judging by recent market activity, however, some of these expectations may have been overly optimistic.

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.