Pork market rebound, following COVID-19 disruptions
During a National Pork Board webinar dated Oct. 27, Iowa State University Extension Livestock Marketing Economist Dr. Lee Schulz provided updates on hog markets, noting they have been moving toward near year-ago levels after facing several disruptions earlier in the year due to COVID-19.
“We’ve seen tremendous changes in markets from what we expected in January,” Schulz said. “What changed obviously was the COVID-19 pandemic, which impacted prices this spring and summer.”
In fact, according to Schulz, prices in the autumn months have moved back in line with beginning of the year projections, following a strong rally in August, September and most of October.
“Looking ahead to the summer of 2021, contracts are trading in a fairly narrow range, with the June 2021 contract seeing support in the $70 to $75 range and resistance in the $80 to $85 range,” Schulz noted. “We expect this to continue until the markets get a signal to move in either direction.”
“Although there is still a lot of debate regarding what prices will do in the fourth quarter of this year, they appear to be in line with projections from earlier in the year,” he added.
Schulz noted pig prices have rebounded from an extremely low point this summer.
“We’ve seen tremendous appreciation in pig prices from summer lows,” he stated. “Producers dealt with big losses during the height of coronavirus disruptions this spring and have seen about a $50 per head swing in profitability from late spring 2019 to spring of 2020.”
“There has been a large impact on producer profitability this year, but 2021 shows a lot of optimism as futures prices have rebounded,” he continued.
Additionally, Schulz noted pork primal cuts, except for pork butt, are all above year-ago levels. He also pointed out pork in cold storage has not moved much since May and is currently down nearly 22 percent from a year ago.
“It has also been a strong year for exports,” Schulz stated. “This is mostly due to China, but we also have to point to Vietnam as a strong market this year. Japan and Canada have been strong markets as well.”
In addition, Schulz noted there have been tremendous purchases from Mexico, which has been aided by strength in Mexican currency relative to the U.S. dollar.
“With only a few months to go, this is going to be a historic year for pork exports,” Schulz said.
When it comes to barrow and gilt slaughter, Schulz noted numbers were down considerably during the spring, but have gradually slid back to near year-ago levels.
“The backlog peaked in late May and early June, but the industry has been working through it,” he stated.
While producer-owned weights are at fairly normal levels for this time of year, he pointed out packer-owned weights are much higher than last year and the five-year average.
“After spiking this fall, packer-owned weights are moving higher than 220 pounds,” Schulz said.
Schulz noted after seeing significant capacity reductions earlier in the year due to the COVID-19 pandemic, hog processing facilities are now at nearly 95 percent of operational capacity and hog slaughter is similar to the autumn months of 2019.
Hannah Bugas is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.