Impressive demand, tighter hog supplies and a smaller than expected slaughter have created headwinds for the hogs and pork outlook at the start of August.
Rob Murphy, executive vice president, research and analysis at J.S. Ferraro, shares his expectations for hogs and pork as we head into the last part of Q3 and Q4.
Here’s a look at the top 10 things to keep in mind to prepare for the months ahead:
10. Cutout pork prices surged in the U.S. in July with strong ham and belly prices, as well as a moderate price increases in retail primals. Cutout values will likely fall quickly as the belly and ham markets run their course, expected to be mid-August or later.
9. Hog supplies were tighter, likely caused by high temperatures found in the Midwest slowing weight gain in the hogs. As packers begin slaughtering the March/May pig crop after Labor Day, the 1% decrease in live pigs year over year will be expected to carry over to a 1% decrease in hog slaughter.
8. With tighter supplies, hog slaughter has likely reached its lowest level in 2022; increased slaughter during August will likely increase slowly as warm temperatures persist.
7. Negotiated cash trade saw strength, as packers bid more aggressively to capture the low hog supply. Likely mid-to-late August, the available hog supply should expand enough to see the spot market soften.
6. Pork experienced recent strong domestic demand. The upcycle is expected to fade by mid-August, but it could hold on into September and even October.
5. Pork availability this fall should be similar year over year, as the smaller slaughter levels are offset by heavier carcass weights; forecasted carcass weights up 1.4% year over year during Q4.
4. Retail pork prices have been at all-time record levels over the past several months and have the possibility to remain high, as high inflation and rising interest rates may keep consumers choosing pork over more expensive beef options.
3. Continued high retail prices might also cause a decrease in domestic demand, leading to a balance in supply in coming months.
2. Runaway pork prices are not expected between now and Labor Day, but seasonally tight hog supplies and warm temperatures helps keep a level of upside risk in the market.
1. Pork buyers may benefit later in the year, as oftentimes periods of exceptionally high pricing are later offset by exceptionally weak pricing.
