Why Market Prices for Lean Hogs Have Been Dropping Over the Past Several Weeks
If you’re a pork producer, you’ve noticed how the market value for lean hogs has dropped quite a bit in the past month-and-a-half.
“It all comes back to simple supply and demand—and right now, the demand just isn’t there for the supply,” says Karl Setzer, Commodity Risk Analyst with AgriVisor.
On Feb. 21, 2023—the current month contract for lean hogs were trading at nearly $90 a hundred weight. On April 3, prices had fallen to nearly $74.52—which is a drop of more than 17 percent over the past six weeks.
“What’s getting on pork production here lately is the simple volume of pork,” according to Setzer. “We had a Cold Storage report that came out showed us that inventory is up on the year. In the Hog and Pig Production report that came out, there are two percent fewer hogs in the United States, which is a bullish number. But, we still have a tremendous amount of pork to work through—and a two-percent decline in hogs is not going to offset that right now.”
He says another factor impacting prices is that the weights of hogs have been on the rise.
“We look at the hog numbers and the cattle numbers—but when we look at the weights, that’s where the big factor starts to come in because we can process fewer hogs, but if the weights are heavier, it’s still a moot point on your total pork production.”
Another factor is the demand for pork exports. Even though there have been reports of African Swine Fever impacting Chinese hog production, Setzer says China has not been purchasing any additional pork from the U.S. to pick up their slack.
“China was quick to drop their mad cow disease bans they had on Brazil following their latest case,” says Setzer. “That that tells me anyway that China is just not interested in extending trade with the United States right now. That definitely could be a factor as we start to move forward here. The question will start to become—even if China does need pork, will they be willing to buy it from the United States?”
Setzer believes that the commodity prices for lean hogs will likely pick back up over the summer months as more Americans begin to grill outside again.
“Pork is a little bit more affordable than beef right now and definitely more plentiful,” says Setzer. “I wouldn’t be too surprised if we don’t see some domestic pork consumption numbers jump up a little bit.”