Strong demand, lower supplies support North American hog prices

MarketsFarm — Hog prices in North America typically come under pressure heading into fall, as the end of barbecue season coincides with more hogs coming to slaughter.

However, strong global demand has propped up hog prices in recent weeks, with cash prices increasing by over 25 per cent.

Fewer hogs coming to market, coupled with strong export demand, were the main reasons behind the strength in prices, according to Brad Marceniuk, Saskatchewan’s provincial livestock economist in Saskatoon.

“Typically we see more hogs come to market, but this year we’re seeing fewer,” he said.

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Recent data from the U.S. Department of Agriculture (USDA) indicated inventories of pigs between 120 and 179 lbs. has increased by over six per cent year over year, and pigs 180 lbs. and heavier have increased by nearly 10 per cent.

“Prices depend if hogs come to market,” Marceniuk said, noting the USDA Hogs and Pigs Report published in September also showed recent slaughter numbers have been down by nearly four per cent.

As of early September, hog slaughter prices had rallied by over 25 per cent compared to earlier in the year. U.S. cash hog prices as of Sept. 25 averaged US$64.70 per hundredweight, up by over US$3/cwt or 6.1 per cent from the prior week’s prices.

In Canada, hog prices were around $175.58 per hundred kg on Sept. 25, up by over $13/ckg on the week.

The COVID-19 pandemic has caused many meat processing plants to shutter due to outbreaks and lack of physical distancing, causing backlogs in the meat supply chain.

“With hogs marketed every week on a regular basis, lower slaughter capacity would result in hogs getting backed up on farms,” he said.

Increased global export demand has also been supportive of North American hog prices. African swine fever (ASF) decimated China’s hog population in 2019, reducing it by about 40 per cent. Germany, previously one of the top exporters of pork to China, has also been hit by ASF, causing China to look elsewhere for its pork products.

Marceniuk expected short-term prices to pull back slightly, then move higher in early 2021, barring significant outbreaks of COVID-19 in meatpacking facilities.

“Expect prices moving higher in early 2021, as long as demand stays strong, and COVID-19 doesn’t affect slaughter capacity at plants again,” he said.

“Any outbreaks causing new plant closures would reduce hog slaughter capacity and be negative for hog prices.”

— Marlo Glass reports for MarketsFarm from Winnipeg.

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