Industry expansion, export woes send US hog futures down

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  Andrea Gantz

  Hog futures are down, largely due to industry expansion and a decreased demand for U.S. pork exports to China.

  From WATTAgNet:
  Hog futures prices recently hit a four-year low, with industry expansion and a decline in exports to China contributing to the price drop.
  A strong dollar has made U.S. pork more costly than meat from competing countries, which has led to a slowdown in exports, especially to China. And cargo slowdowns due to a labor dispute at West Coast ports has left stocks of pork products piling up.
  Pork prices followed beef prices to record high levels in 2014, as the cattle herd shrank and porcine epidemic diarrhea (PED) virus diminished the U.S. hog herd. Pork prices have since fallen, but U.S. consumers that had switched to chicken are not yet returning to pork, retail food analysts say.
  Boneless pork loin prices have fallen more than 15 percent at retailers in the past two months alone, and the U.S. Department of Agriculture in January predicted U.S. hog prices will drop 17.5 percent overall this year.
  “Now that pork prices are collapsing, this could make pork more competitive,” said Jared Koerten, senior foods analyst with research firm Euromonitor International. “The question is, will [consumers] switch back from chicken to pork?”
  Hog industry expansion
  A boom in hog barn construction across rural America began as meat packers like Tyson Foods, Seaboard, JBS USA and Cargill pushed farmers to rebuild quickly after PED virus killed an estimated 8.5 million piglets in 27 states.
  The building boom has facilitated a surge in the U.S. hog and pig herd, which has rebounded from an eight-year low of 65.1 million this past September, to 66.1 million as of December, according to USDA data. The agency expects pork production to increase by 4.6 percent in 2015 over 2014.
  Pig farmers, meanwhile, could be facing declining margins and rising debt payments in the years to come.
  “When times get tough, and they will in the next two or three years, that's when you'll see some of the farmers be tested," said Will Sawyer, a protein analyst with Rabobank.
  Export pressures
  The fall in U.S. pork prices is occurring amid an unexpectedly sharp fall in demand from China, a large U.S. export market. U.S. pork exports to China in 2014 were down 34 percent from a year earlier, as high U.S. prices sent Chinese buyers to lower-priced suppliers from Europe.
  Many meat packers also curtailed their pork exports to China because of the livestock drug ractopamine, a growth stimulant U.S. hog farmers use to add animal weight before slaughter. China bars shipments from at least 25 U.S. pork plants over ractopamine issues, said Joel Haggard, Asia Pacific director of the U.S. Meat Export Federation. The list includes some of the largest U.S. slaughterhouses.
  Domestic Chinese factors also are at play. The country’s economic slowdown has contributed to a 9 percent decrease in demand for pork, according to swine-industry research firm Soozhu.com. Meanwhile, Chinese hog production is on the rise, with 735 million pigs raised for slaughter, up 2.7 percent over 2013, according to Feng Yonghui, general manager at Soozhu.com. There are signs the Chinese hog boom may have overheated, with producers losing money for 13 months in a row, Feng said. 

EU pig producers initiate pork futures changes

Pig producers in Belgium and the Netherlands are banding together to create a sufficient volume of pigs between them to trade on the futures market operating in Frankfurt, Germany, according to Albert Vernooij, animal protein markets analyst for Netherlands-based Rabobank International.
The projects have been backed by local state authorities in support of their farmers. The development is a reaction to increased volatility of international prices for feed ingredients and livestock, commented Vernooij at an outlook conference held in London. Rabobank’s team of analysts believe that, on average, commodity prices will trend higher and remain more volatile, at least until the end of 2014.
Perhaps in the coming years, Vernooij added, Europe will have a US-style scenario in which slaughter pigs have eight or nine different ‘owners’ through futures market trading before they arrive at the abattoir.

US hog futures up on increased pork demand

U.S. hog futures showed an upward trend the week ending October 12 on increasing demand for pork, with December futures rising 1.1 percent to 78.375 cents a pound at 1 p.m. on the Chicago Mercantile Exchange. Prices advanced 2.4 percent overall during the week, the second straight gain.
“We have been able to move pork,” said Don Roose, the president of U.S. Commodities Inc. “We have been able to make money. We’ve been eating through the large supply.” Wholesale pork rose 1.2 percent to 87.69 cents a pound on October 11, the highest since August 21, and prices are up 16 percent from a 22-month low on Sept. 19, according to the U.S. Department of Agriculture. On October 11, hogs for immediate delivery to slaughterhouses rose 0.4 percent to 79.33 cents a pound, and prices are up 1.3 percent in 2012.

US hog futures fall on lowered values

U.S. hog futures have dropped 1%, pressured by plentiful hog marketings that lowered cash hog and retail pork values, according to the latest reports.
Cooler weather resulted in a 1.5-pound increase in average hog weights in Iowa and southern Minnesota, to 262.5 pounds, compared with the previous week. Higher hog weights increase pork tonnage to wholesalers and makes more hogs available to packers.
An estimated 1.249 million hogs have been processed so far during the week of August 22, 11,000 more than the previous week and up 19,000 from the asme time in 2010, according to U.S. Department of Agriculture numbers.
October hogs closed down 1.175 cents, to 87.050, on August 24, and December was down 0.875 cents, to 83.450.