Current U.S. hog slaughter is exceeding expectations, with hog supplies about three per cent higher than USDA projections. Hog supplies are usually highest in the fall, so with such a big supply in August, the market is growing concerned about what this means for prices.
"Normally this is the tightest hog supply that's typically seen over the course of the year," says Tyler Fulton, director of risk management for h@ms Marketing Services Co-op. "If we're running three per cent more than what they've projected for the fall, then things could get really tough. We'd have a tougher time moving all of the pork we'd need to, whether it'd be in domestic or export markets. And there's a question as to whether or not we'd actually have the slaughter capacity — in the United States — to manage all those hogs."
Fulton says this is part of the reason why the fall-month futures have been discounted. Friday's hog margin outlook from h@ms shows the October contract is already trading at a $14.00/cwt discount to the cash market. The heavy supply won't be good for producers in terms of prices, but Fulton says a solid demand could help.
"Pork seems to be moving, really, very well," he says. "Part of that has come from the fact that beef is still very expensive, so consumers are generally opting for that lower-valued meat, but by any measure, demand is performing really well. So the critical thing is whether or not we're going to be able to maintain and grow our export markets in order to clear the heavy supplies that we expect coming down the pipeline."
This could be even more concerning as it's been reported that Agriculture and Agri-Food Canada says Canadian pork exports are down 5 per cent from what they were a year ago, by volume. However, the same report says shipments of live hogs to the U.S. are up over 12 per cent from last year.
Source : PortageOnline