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Pig outlook: bulls keeping lean hog futures price uptrend alive

Read Jim Wyckoff's latest weekly analysis of the global hog market.

4 September 2020, at 8:31am

The pig traders’ perspective

Lean hog futures prices this week hit a four-month high, amid gradually improving technical and fundamental elements. Recent price action strongly suggests the lean hog futures market has bottomed out and that prices can work sideways-to-higher in the coming weeks.

Higher beef prices and continued good demand for pork from China will continue to work in favour of the hog market bulls. Still, limited price rallies will be big supplies coming to market and hog weights that are still above year-ago levels. Key in the coming weeks for the US market is how much public school and university lunch programmes come back online, as that will have a significant impact on demand for pork.

The next week’s likely high-low price trading ranges

October lean hog futures--$55.00 to $60.00, and with a sideways-higher bias

December soybean meal futures--$305.00 to $318.00, and with a sideways-higher bias

December corn futures--$3.50 to $3.70, and a sideways-higher bias

Bulls keeping price uptrend alive and gain momentum late this week, to suggest still higher price action in the near term
Bulls keeping price uptrend alive and gain momentum late this week, to suggest still higher price action in the near term

© Jim Wyckoff

Latest US Department of Agriculture (USDA) reports, and other news

US pork export pace remains solid; China a good buyer

Thursday’s USDA weekly export sales report showed US pork net sales of 53,600 metric tons (MT) reported for 2020 were up 36 percent from the previous week and up noticeably from the prior 4-week average.

Increases primarily for China (28,700 MT, including decreases of 900 MT), Mexico (14,700 MT, including decreases of 1,500 MT), Japan (2,900 MT, including decreases of 300 MT), Canada (2,000 MT, including decreases of 500 MT), and Chile (1,400 MT), were offset by reductions primarily for Macedonia (200 MT).

For 2021, total net sales of 300 MT were for Australia. Exports of 32,500 MT were unchanged from the previous week, but down 3 percent from the prior 4-week average. The destinations were primarily to China (9,700 MT), Mexico (9,400 MT), Japan (4,200 MT), Canada (3,000 MT), and South Korea (1,700 MT).

Rising pork production in Japan

Pork production in Japan in 2021 is estimated to increase around one percent as producers rebound from a Classical swine fever outbreak in 2018, according to a recent USDA report.

Pork consumption will remain strong as rising household consumption offsets declining foodservice demand. Expanding pork stocks will put downward pressure on imports in 2020 and is projected to limit 2021 growth to less than half a percent.

Meantime, Japan’s beef production is projected to remain flat in 2021 as marginally higher slaughter is offset by lower carcass weights. Falling wagyu prices due to oversupply is expected to lead to slightly lower calf production in 2021. Beef consumption is projected to recover in 2021 after a slowdown in 2020. Beef imports will remain flat as traders maintain buffer stocks against future market shocks.

Read the latest updates on the poultry meat market on The Poultry Site and Jim Wyckoff's analysis of the global cattle industry on The Cattle Site.