HAMS Marketing Services says, despite some improvement, reduced U.S. pork processing capacity continues to negatively impact North American live hog prices. Although the situation has improved, due in part to the U.S. government's designation of pork processing as an essential service, U.S. capacity continues to run below year ago levels.
Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says a growing backlog in the U.S. continues to put heavy pressure on cash prices because there's not enough capacity at these slower chain speeds to get all of the animals that are ready to go slaughtered.
Clip-Tyler Fulton-HAMS Marketing Services:
For those U.S. producers that did not have any kind of a supply contract with a packer and are selling their hogs on a negotiated basis, it is an absolute wreck. Prices in the United States are really at the lowest level that they've been in 20 years.
Thankfully there is a little bit of improvement on that if you do have a commitment. Typically it means that they're referencing the pork cutout value to some degree. The degree to which they're referencing that pork cutout value really determines whether or not you're still in very negative territory or, if you're lucky enough to have it where it's referencing the cutout value alone, then you're doing fairly well.
It seems as though we've improved from the real low of packer capacity which was less than two thirds of normal slaughter capacity. Last week's weekly slaughter exceeded 2.1 million head but that's still more than 10 percent lower than what it would have been last year and doesn't represent the growth in hog numbers that we've seen this year.