What’s Driving Higher Hog Prices?

In July, U.S. pork exports topped the record held since April 2018, according to the U.S. Meat Export Federation (USMEF). ( Farm Journal )

USDA is forecasting 10.8% higher hog prices year-over-year in 2019. While there are many factors at play, improving exports and packer competition are driving prices higher, said Millie Haley of USDA’s Economic Research Service. 

In July, U.S. pork exports topped the record held since April 2018, according to the U.S. Meat Export Federation (USMEF). July pork exports surged to 233,242 metric tons (mt), up 32% year-over-year. Export value was $623.3 million, up 34% and breaking the previous high from November 2017. These results pushed January through July exports 2% ahead of last year's pace at 1.48 million mt while value was down 2% at $3.77 billion. Pork export value averaged $58.92 per head in July, up 22% from a year ago and the highest in five years.

On the surface, China’s 10% increase in tariffs earlier this year would seem negative, but that’s not been the case, according to Pro Farmer editor Brian Grete. 

“The way [the hog market] rallied in the face of bearish Chinese news on tariffs and closing limit up in the front month contract is pretty darn impressive, given the circumstances,” Grete told “AgriTalk” host Chip Flory.

Usually markets don’t make those kinds of large moves, he said, unless the “know something.” Maybe the impact of African swine fever on Chinese hog herds is worse than originally thought. 

“We don't really know what the impact is fully, just that it's much greater than everything that's being reported,” Grete said. “Talking to people who have been over there, directly involved or indirectly involved with that situation, it's just devastating, completely devastating.”

From a pork perspective, there are long-term positive ramifications possibly, he said. 

“Lost in all the China noise is the fact producers appear to be benefitting from packer competition for hogs,” Haley said. “There’s lots of new kill space in the Midwest that needs to be filled now.”

Packers are having no trouble getting the hogs, Grete added. 

“But it doesn't feel like the system is overwhelmed by numbers either, and I don't think it will be to be honest with you,” he said. “We've added enough slaughter capacity the past couple years to the point where it shouldn't take us to our knees.” 

That said, Grete expects no shortage of hogs moving through the system the last half of 2019.