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Will hog prices beat cattle prices?

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Last time hogs had a higher price than cattle was nearly two decades ago.

Hog prices have been on a strong upward trend, steadily gaining since the start of the year. According to the Livestock Marketing Information Center (LMIC), the national weighted average base slaughter hog carcass price started the year at $61.85/cwt. but has increased to $102.22/cwt., a $40.37/cwt. (65.3%) jump in just over four months. On average, LMIC said hog prices have gained over $2.00/cwt. (about 3.0%) each week since the start of the year. The higher hog prices are further being bolstered by a steady rise in the pork cutout value, which, apart from declines the week of January 22 and last month, has seen week-over-week gains since the start of the year.

This jump in hog prices and the cutout value, LMIC said, are reflective of tighter hog supplies which were indicated by the 2.5% decline in both the 120-179 lbs. and 180 lbs. and over market hog categories that were reported in the March 1 USDA “Hogs and Pigs” report.

While cattle prices have also made gains since the start of the year, LMIC said they are not nearly to the extent that hogs have been able to make. The 5-market weighted average weekly steer price started the year at $111.28/cwt. then peaked at $122.03/cwt. in mid-April, a $10.76/cwt. (9.7%) gain. Since the peak, cattle prices have eroded $3.14 to $118.89/cwt. last week.

LMIC pointed out that weekly cattle slaughter has been averaging near 650,000 head per week, except for the first week in January and when the winter storm occurred in February. This is near post-pandemic weekly slaughter highs, which signals that COVID-related changes in processing facilities are limiting slaughter levels. LMIC said the capacity-limited flow of cattle has limited upside potential for cattle prices but has led to a rise in the choice boxed beef cutout value since the start of the year which has increased 41.1% ($85.06) to $291.79/cwt.

The continued rise in hog prices but subdued cattle prices begs the questions of whether hog prices will reach a higher level than cattle prices, LMIC said. The June lean hog futures contract recently traded around $114 while the June live cattle contract was near $115/cwt., a $1 per cwt premium based on June futures contracts. Based on the 5-market steer price during the same timeframe, the premium over the base slaughter hog price was only commanding $16.67/cwt.

“The last time this difference was smaller than $16.67 was August 2011 and the last time hogs had a higher price than cattle was nearly two decades ago.”

This is a comparison of the hog carcass price versus the live cattle price, but for discussion purposes, a shrinking value between the two prices highlights the significant rise in hog prices, LMIC added. This also highlights how limited the upside potential for cattle prices has been, especially given the substantial rise in boxed beef prices.

“One thing that can be said for both hogs and cattle is that the strong pork and beef cutout values are indicating robust demand in the near term.”

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