Short supplies of live hogs drive markets higher
Live hog prices have increased substantially since the beginning of the calendar year. Led by the western corn belt market for hogs, up $28.73, the market is chasing pigs for slaughter and driving pig prices significantly higher than the $18.61 increase in cutout value would dictate. Futures prices have also seen significant positive movement with April 2022 through February 2023 futures trading at the contract highs in the last week.
Drivers of these market moves include:
- Shorter than anticipated market ready pigs
- Continued strong domestic and export demand
- Competing meat prices are high
Pig Supply
First, let’s look at market numbers. We have fewer pigs going to market, which was estimated in late December with the USDA Hogs & Pigs Report. The estimate of pigs in inventory was down 93.9% for pigs over 120 pounds. Those pigs would be marketed from December 1 to February 28. Based on the lack of response in the futures market, I don’t think traders believed the numbers. Sow numbers are down 291,000 from December 1, 2019, based on the report, and I expect that the impact of PRRSv on our production is also a big factor in 2020 and continuing in 2021.
Pork Demand
Pork demand in the U.S. is strong and retail prices are higher than ever. We’ve seen record retail prices in recent months. Consumers are continuing to demand pork products as a good value relative to competing meats.
Export volumes for pork and pork variety meat in 2021 was 2.9 million metric tons, down 2% from the record volumes in 2020. The value of those exports was a record at $8.1 billion, up 5% from the record value in 2020.
Competing Meat Prices
There is no real shortage of meat supplies available but it seems that consumers are willing to pay higher prices, covering higher costs for the raw material, processing and freight. Current wholesale prices for choice beef are 20.7% higher, national composite chicken prices are up 50.6%, and national turkey hen prices are 20.1% higher than year ago levels. In 2021, meat production was up 0.3% compared to 2020 with beef up 3.0%, pork down 2.2%, chicken up 0.6%, and turkey down 3.2%.