MarketsFarm — In April 2020, during the early days of the COVID-19 pandemic, prices for lean hog futures dropped to their lowest point since 2002, falling below US$40 per hundredweight.
Nearly a year later, the industry is in the middle of a speedy recovery.
At the Chicago Mercantile Exchange (CME) on Thursday, lean hog futures were either approaching or have surpassed the US$100/cwt mark, levels which haven’t been seen since October 2014.
Brad Marceniuk, a Saskatoon-based livestock economist for the government of Saskatchewan, said there are major drivers right now behind the rise in hog prices.
“Domestic markets typically get stronger into spring and summer with barbecue season increasing demand. We have also had reduced U.S. hog slaughter numbers overall the last few weeks which has reduced pork supply,” he said via email.
“Last spring, the pandemic forced many U.S. hog slaughter plants to slow down, some temporarily closing, which reduced weekly pork supplies for many weeks, reducing U.S. pork in cold storage. Previous pork in cold storage levels have not regained to pre-pandemic levels.”
One of the major drivers is China, as it continues to rebuild its hog herd decimated by African swine fever. Last winter, there were reports China was steadily growing its herd and reducing its overseas hog purchases. Now, they are starting back up again.
“Over the last few weeks there have been reports that China is again struggling to deal with African swine fever and have been forced to kill millions of pigs. This news has likely helped the lean hogs futures contracts to move higher in anticipation of higher pork exports,” Marceniuk said.
Canadian and U.S. hog markets are thriving and, despite rising feed prices taking a bite out of profits, slaughter-weight hog prices are now 60 per cent higher than the low levels seen last July, according to Marceniuk.
“I expect hog prices over the next few months to continue to be strong. We’re at the time of year where seasonal demand is stronger…If (China’s) demand picks up again, we could see a bump up in prices higher,” he added.
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.