37 The Trusted Source for Canada’s Pork Producers Better Pork | April 2024 CONTINUED EXPORT STRENGTH EXPECTED U.S. pork domestic demand in an upswing. By Moe Agostino & Abhinesh Gopal Moe’s Market Minute The pork sector in 2023 was plagued by lacklustre domestic demand, and that was holding the industry back and depressing hog values. Producer returns remained in the red for much of 2023 and into the early part of 2024. The missing link from last year popped up this year as strong United States (U.S.) domestic demand has supported stronger pork cutout and hog cash values in 2024. Add lower slaughter coming in at 2.5 per cent below last year and you have the recipe for higher prices. Owing to these supportive “twin engines” since the start of the year, hog futures put on a sharp recovery and climbed by about 20 per cent towards the end of January. Hog futures were among the best performing commodities during the early part of the year, and they maintained a bullish sloping uptrend. 2024 is unlike the forgettable year of 2023. Strong U.S. pork demand is reflected in strong cutouts, along with the individual primals. The cutout value strength during the early part of the year was only really rivalled by 2022 and the record year of 2014. During mid-January to early-February, pork cutouts were higher year-on-year (Y/Y) by +11 to 13 per cent and trading near $90 per hundredweight (cwt), even briefly breaking higher. There were market analyst reports in the second week of February that U.S. cash hogs were up by some 40 per cent since the start of the year. Strong packer margins prompted strong packer demand and weekly lower hog slaughter levels kept the producer inventory current. Hog slaughter levels though were weighed down by the unavailability of animals, which is a “good” problem to have when demand is strong. It just keeps the spot cash market supported. The third “undying” engine supporting the hog/pork industry continues to be bouyant export demand. U.S. pork exports were able to garner greater global market share in 2023 as European Union (E.U.) pork exports fell off by about 25 per cent Y/Y. “Led by a record-shattering performance in Mexico and broad-based growth in other markets, U.S. pork exports set a value record in 2023. The strong December results pushed 2023 export value to a record $8.16 billion, up 6 per cent from 2022,” according to the U.S. Meat Export Federation. Continued strength in exports is expected throughout 2024 and for expanded demand outside of mainstay market Mexico. African swine fever (ASF) continues to plague the Chinese hog herd despite them transitioning almost to fully mechanized and organized commercial farming in “tall multi-storeyed hog farm buildings” following their 2018–19 ASF debacle, which actually spread globally and became a global swine epidemic/pandemic. ASF seems to have hit China hard again in 2023, promoting quick liquidation among hog producers there, and that has caused massive losses to the biggest pork producers in China. China is likely to be forced to import big amounts of pork in 2024 and if the volumes imported during the initial weeks of 2024 are any indication, the second half of the year could see historically high U.S. pork purchases from them. The market has always been focused on China’s pork demand given their voracious appetite for their staple meat and 2024 could turn out to be “special” at a time when Mexico continues to be the leading buyer of U.S. pork. Through the early part of the year, summer lean hog futures were in a contango versus nearby futures, suggesting a bullish summer outlook for 2024. In early February, June to July hog futures were trading at about $14 to $15.50/cwt above the April futures. Seasonally we could see an early peak in futures (by April to May) instead of peaking during the normal June through August period. On the supply, the U.S. Department of Agriculture Mexico is leading the demand for U.S. pork. Bonnie Marquette/iStock/Getty Images Plus photo
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