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.
- Slaughter numbers should be near the highest levels for the year and will be at least 100k head/week lower in Jan/Feb. This should bolster prices for some fresh pork items, such as loins and butts.
- Pork belly prices were sharply lower as packers struggled to clear the market given the seasonal increase in slaughter and freezers that already have 200% more bellies than a year ago.
- Pork trim has been quite resilient despite the increase in slaughter. This is in part due to end users caught short and with limited inventories on hand. Robust demand for bone-in hams saw packers sell more product as such rather than convert them to boneless product.
- Seasonal demand is strong for picnics into the holidays but should ease in January. Lack of strong export sales to Asia should also help pressure picnic prices lower in Jan/Feb.
Hog futures volatility and outlook for processing items in Q1
Lean hog futures have seen significant swings in the last three months and much of that can be attributed to money flow. We saw sharp breaks and then quick recoveries in late September and late November and in both cases these coincided with big moves in speculative fund net long positions. The situation in the product markets is mixed. Fresh pork is largely trading in line with expectations although some items continue to struggle to gain traction while prices for processing items are a bit in flux due to seasonal factors as well as freezer stocks (or lack thereof). Below is a quick update of key drivers for each primal.
Primal value was last pegged about 13% above year ago levels. Lower slaughter has been a key factor driving prices in the near term. Holiday features generally tend to limit retail demand at this time of year. Prices are expected to trend higher in Q1 as slaughter remains under 2022 levels while retail business improves after the holidays.
Prices largely moving sideways in the near term as seasonal demand is soft. A modest improvement expected in Q1 but price moves are expected to be modest, with more upside expected in Q2 as slaughter seasonally declines and retailers focus on spring merchandising and features.
Demand is usually good towards the end of the year and this has been further amplified by the shortfall in slaughter, which has severely limited spot availability. Prices should take a step back in Q1 on softer seasonal demand. Lack of strong demand from Asia should also keep prices in check during the winter months.
A combination of strong retail demand for the holidays and steady sales to Mexico limited spot availability throughout the fall. As holiday demand has eased, ham values have pulled back but they remain well above year ago levels. Processors will look to cover Easter needs on breaks and expected y/y decline in slaughter will continue to underpin prices. However, retailers will likely face much higher prices when they go to negotiate Easter purchases. This will tend to ration out some demand. Our expectation is for prices to remain above year ago levels but below fall highs
The supply of bellies at the end of October was already some 246% higher than a year ago. Slaughter last week was near 2.6M head resulting in ample belly volume available in the spot market. With freezer space limited, packers struggled to clear the market, causing prices to drop to $90/cwt. Lower slaughter later in December should help steady the market.
Freezer inventories are heavy and its an uphill battle to get end users to put even more product away. High prices at foodservice and weak seasonal demand continues to keep this market on the defensive for the moment.
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.