USA: Prices on the slaughter pig market continue to rise

Observations

After the USDA report, June futures for slaughter pigs with 53-54% lean muscle mass yield increased by $6.45. Highest growth in a year. And a price increase of $14.00 US/head in one week.

Last Friday the nationally agreed slaughter pig price was 86.70¢c/lb or $1.91 US/kg (the highest since August), up $5.23 US for the week. Plus $12 US/head.

On Friday, on the American market, pork carcasses at slaughter weight cost 97.75¢ cents/lb ($2.16 US/kg), having risen by 4¢ cents/lb (~9¢ cents/kg) over the week.

USDA – Last week the average price for 40 lb (~18 kg) finisher pigs was $97 US/head – the first time the price has been higher in a year-over-year comparison. There were periods last year when finisher pigs were priced in the US$30 range.

Higher slaughter hog prices , higher slaughter hog futures, higher slaughter weight carcass prices and higher finisher pig prices. We believe that no one ever pays more than they have to. The pendulum exists and now it has swung towards manufacturers. The “pig cycle” is alive and well. Financial losses always lead to fewer pigs and higher prices.

Proposition 12 - Remember we read that there will be a pork shortage in California due to this law. Note that there is little to no discussion about the insufficient pork supply. It looks like pork is getting there somehow, and you can also read that California eats less and pays more. It's as if the silent majority of consumers care about how pregnant sows are kept. And only the elite talk about food inflation and at the same time introduce rules that increase the cost of food. Dumb and Dumber.

A week ago, the USDA reported that significantly less acreage (by 6 million acres) would be planted with corn in 2024 . Since this announcement, the price of corn has fallen 8¢ cents/bushel. We suspect the market believes those 6 million acres will still be planted to either corn or soybeans. Farmers are engaged in agriculture, the share of arable land in the US will encourage planting of these acres. Unlike the pork industry, which lacks any significant government financial support, the corn-soybean complex appears to receive government money whenever it appears necessary to support the industry. Perhaps someday the pork industry could also get a program that would encourage more pork consumption, something like the familiar mandate to use corn and soybeans for ethanol production.

Problems with bird flu have also hit beef production. The number of cattle is decreasing , and futures are going down. We believe this is inspired by national news that a major producer has lost 2 million laying hens. They reported this news as if it was the first time. In past years, the poultry industry has lost tens of millions of chickens. Thank God they didn't call it swine flu.

The Chinese government says the breeding stock fell by 2.8 million last year and by a further 242,000 sows in February. A massive liquidation of livestock has taken place and is still ongoing. And it's only a matter of time before the situation escalates to the limit. We expect slaughter pig prices in CHINA to be much higher this summer as supply decreases by at least a million pigs per week. If prices for early weaned piglets signal a “train is approaching”, then on the Chinese market on January 12, the average price for early weaned piglets was 175 RMB ($24.44), and on April 5 it was already 602 RMB ($83.38). Brief summary: up, up and up.

So far, the scenario for our industry looks much better. As of January 1, an analysis for the next twelve months based on futures showed losses of at least $10 US/head. Last week, a similar analysis forecast profits of up to $20 US/head. The difference is $30 US/head. Our industry needs this because the losses were too high. No industry can survive by losing money forever. We expect that the reality of producing fewer and fewer market hogs, coupled with positive demand factors, will result in slaughter hog prices over the next several months above what we currently experience with slaughter hog futures at their highest possible levels.