Pork Slaughter to Normalize in Spring, RaboBank Says

Hogs in pins ( Jo Windmann )

Based on hog inventory estimates and weaker pork prices, Rabobank analysts expect packers to back off the harvest in coming weeks. In addition to holiday and weather-related disruptions aggravating an already challenging supply situation, increases in slaughter at the beginning of 2020 were larger than expected. All of this is weighing on hog prices and returns, Rabobank analysts say in its North American Agribusiness Review.

“Hog prices are expected to strengthen seasonally through the spring and summer on tighter supply and good export demand. We are less optimistic about 2H 2020, however, as continued growth in hog supplies will again test the limits of the packer and the market’s ability to absorb the increase,” Rabobank analysts say.

Pork prices were on average 9% ahead of year-ago levels through Q4 2019, mostly attributed to gains in export-related items. The cutout averaged 6.4% above year-ago levels through February, the review said, with gains on all items except bellies, which trailed year-ago levels by 25%. 

Domestic demand remains steady, and export demand has helped absorb the plentiful pork supplies. December pork exports were up 36% YOY to a record 239,000 metric tons.

“Recent pork price weakness on the uncertainties created by China’s coronavirus outbreak is expected to be short-lived, but will depress Q1 2020 pork values,” Rabobank analysts predict. “We expect a rebound in the cutout in the coming weeks but acknowledge abundant pork supplies, along with larger supplies of competing proteins, are expected to cap the upside in 2020 cutout values.”

U.S. pork and variety meat exports were up 10% in 2019 to 2.2m metric tons, with shipments to China/Hong Kong (up 684% YOY) offsetting weakness in other markets. 

Although export demand was higher to start the year, it dropped quickly after China’s coronavirus outbreak. 

“We are encouraged by the increase in Chinese hog and pork prices since the end of the holiday but note supply chain inefficiencies limit the reliability of data. Global shortfalls in pork production, however, remain supportive to U.S. pork,” Rabobank analysts say in the review.

Meanwhile, Mexican exports were up 44% in November and are expected to reach 180,000 metric tons CWE by the end of 2019, analysts predict. China now accounts for 35% of total Mexican exports, in contrast to 9% a year ago.

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