Uncertainty looms over hog market

Challenge coming in September when supply availability increases, weather turns cooler and retailers shift away from grilling items.

Krissa Welshans, Livestock Editor

August 12, 2020

2 Min Read
Uncertainty looms over hog market

Lean hog futures have seen some gains recently, but Steiner Consulting Group (SCG) said there is still a fair amount of uncertainty surrounding price direction in the near term.  

“The big unknown at this time is the supply of hogs that is currently in the pipeline and expectations for slaughter in September/October,” SCG noted in CME Group’s “Daily Livestock Report.”

Hog carcass weights steadily declined in July and early August, which SCG said in a normal year would suggest that producers are fairly current on their marketings. However, the U.S. Department of Agriculture’s June “Hogs & Pigs” report indicated that over 3 million more hogs would need to be processed in June, July and August than a year ago. SCG said hog slaughter during this period has been running above year-ago levels, but according to its calculations, weekly slaughter between June 1 and mid-August is up 1.4 million head, or 6.1%, from a year ago.

SCG questioned, “Was the USDA survey wrong? Or have producers figured out how to slow down the rate of growth enough to match weekly supply with shackle space available?”

USDA recently noted that declining hog slaughter weights suggest that the U.S. hog industry is managing the supply chain consequences of COVID-19, with weights falling almost 4% since their peak during the week of May 15, 2020.

weekly hog weights 8.12.20.png

“There are indications that many producers have raised the ceilings on stocking rates of production buildings, meaning that more animals are stocked in barns than was the pre-COVID practice,” USDA noted. “Additionally, many animals have reportedly been placed on maintenance rations -- diets relatively low in protein -- which tends to slow weight gain. This is critical because conventional slaughter plants often experience safety and technical difficulties processing hogs weighing more than 300 lb.”

USDA said these measures, together with higher summer temperatures and rebounding processing capacity utilization, have contributed to reducing the weekly average slaughter weights of federally inspected hogs from their May 15 peak.

Looking ahead, however, SCG said the challenge for the market will come in September as supply availability increases seasonally, the weather turns cooler (leading to heavier weights) and retailers shift away from grilling items.

About the Author(s)

Krissa Welshans

Livestock Editor

Krissa Welshans grew up on a crop farm and cow-calf operation in Marlette, Michigan. Welshans earned a bachelor’s degree in animal science from Michigan State University and master’s degree in public policy from New England College. She and her husband Brock run a show cattle operation in Henrietta, Texas, where they reside with their son, Wynn.

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