25 February 2024

4 minute learn

April lean hog futures this week hit an eight-month excessive and the bulls have the agency near-term technical benefit. Costs are in a seven-week-old uptrend on the day by day bar chart. The newest CME lean hog index jumped one other $1.17 to $77.97 as of Feb. 20, marking back-to-back days of $1.00-plus beneficial properties. The money index is outpacing futures, with the premium within the April contract all the way down to $8.005 as of Wednesday’s shut. Meantime, wholesale pork costs continued to say no at mid-week after surging larger Monday, led by weak point in bellies. Pork motion stays comparatively gentle contemplating the current surge in cutout values, which suggests packer marketings are extra present as manufacturing has fallen within the final couple of weeks.

USDA annual Ag Outlook Discussion board forecast highlights for US pork

Regardless of poor returns for a lot of 2023, the hog sector is elevated manufacturing in 2024. The December 2023 Quarterly Hogs and Pigs report estimated that on December 1, 2023, the stock of all hogs and pigs was slightly below 75.0 million head, just about unchanged from the prior yr. The breeding herd, nonetheless, probably mirrored weak producer margins, declining 3 % to six.0 million head. Producers indicated intentions to farrow about 1.5 % few hogs within the first half of 2024. Nonetheless, the sector is dealing with comparatively massive variety of hogs which must be slaughtered through the first half of 2024 because the pig crop within the second half of 2023 was about unchanged from 2022.

Regardless of diminished farrowings in second-half 2023, the speed of development in pigs per litter within the final 2 quarters of 2023 averaged about 4 % greater than the prior yr and greater than offset the discount in farrowings. Transferring into the second half of 2024, availability of hogs for slaughter will mirror decrease farrowing within the first half of the yr however probably a return to pre-COVID charges of development in prigs per litter. Consequently, the primary half pig crop could also be about one % larger and these larger numbers might be mirrored in continued larger year-over-year ranges of slaughter.

U.S. hog imports are forecast at slightly below 6.65 million head for 2024, down about 2 % from 2023. Imports in 2023 have been stimulated by structural adjustments within the Canadian hog and pork sectors which resulted in elevated shipments to the US. As Canadian hog manufacturing in 2024 is forecast to be decrease, fewer provides are anticipated to be accessible for export. Moreover, comparatively massive provides of hogs within the U.S. could restrict the demand for Canadian hogs. Pushed by bigger pig crops in second-half 2023 and first-half 2024, business pork manufacturing for 2024 is forecast at 27.88 billion kilos, about 2 % larger than 2023. Along with elevated provides of market-ready hogs through the yr, carcass weights are anticipated to extend after declining in 2023. Pork exports in 2023 elevated simply over 7 % to six.82 billion kilos.

Exports to most international locations in North and Central America international locations have been larger. Shipments to Mexico elevated nearly 10 %, 5 exports to Canada have been 8 % larger and exports to Central America and the Caribbean have been about 16 % larger. On the opposite facet of the world, the commerce scenario was extra of a combined bag with exports to Japan and China one % and 18 % decrease, respectively, however exports to South Korea 10 % larger and shipments to Australia up 90 %. Nonetheless, in each China and Japan, the place mixture imports have been decrease, the U.S. was capable of acquire or keep market share, largely on the expense of the EU which had decrease manufacturing in 2023. With expectations of development in U.S pork manufacturing, firming world demand and continued constraints on EU provides, U.S. exports in 2024 are forecast to extend about 4 % to 7.08 billion kilos. Nonetheless, U.S. exporters will probably discover themselves dealing with elevated competitors in quite a lot of key markets from expanded Brazilian provides.

US pork imports declined 15 % in 2023 to 1.14 billion kilos. Imports from three of the 4 main import sources (Canada, the EU, and Mexico) declined at double-digit charges, however imports from Brazil, the fourth largest supply of imports was larger. Regardless of larger home U.S. manufacturing, elevated manufacturing in Mexico and Brazil will probably make the U.S. a beautiful vacation spot for pork. Nonetheless, continued tight provides within the EU could restrict imports from that area though demand could stay sturdy for sure specialty merchandise. U.S. imports are anticipated to extend in 2024 to 1.20 billion kilos, 5 % larger than 2023. Nationwide base 51%-52% lean hog costs, reside equal, are forecast to common $60 per cwt for 2024, up from final yr’s $58.59. Regardless of elevated availability of hogs, anticipated will increase in each home and export demand are anticipated to offer assist for costs.

The subsequent week’s probably high-low worth buying and selling ranges:

April lean hog futures–$83.00 to $89.00 and with a sideways-higher bias

Might soybean meal futures–$325.00 to $350.00, and with a sideways-lower bias

Might corn futures–$4.15 to $4.40 and a sideways-lower bias

Newest analytical day by day charts lean hog, soybean meal and corn futures