Pig outlook: Lean hog futures likely nearing a price bottom, China ASF, failing banks

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global pig news
calendar icon 24 March 2023
clock icon 3 minute read

US futures market perspective 

The steep drop in lean hog futures the past two weeks has left the market is an extremely oversold condition, technically. It’s now likely that a near-term market bottom is very close at hand. The latest CME lean hog index is down another 84 cents, marking a $2.18 drop over the past three days. Despite a sizable discount to the cash index, April lean hog futures faced pressure on Wednesday, suggesting traders anticipate some more near-term cash weakness. The pork complex is having trouble on both sides of the supply/demand balance sheet. Last week’s 2.75% annual increase in hog slaughter confirmed the current supply of hogs is running well above expectations and suggested next week’s (3/30) quarterly USDA Hogs & Pigs report will indicate more of the same. However, grocers kept retail pork prices well above year-ago levels through February despite the big year-to-year reductions posted by cash hog and wholesale pork values. It’s hard to spur consumer demand with the retail cost remaining elevated. Hog market bulls are awaiting the grilling season to get underway. The usual seasonal reduction in hog supplies through the second quarter should also produce spring price gains in hogs.

Weekly USDA pork export sales

Pork: Net US sales of 38,000 MT for 2023 were up 7 percent from the previous week and 8 percent from the prior 4-week average. Increases were primarily for Mexico (18,400 MT, including decreases of 600 MT), Canada (4,800 MT, including decreases of 500 MT), Japan (4,400 MT, including decreases of 200 MT), South Korea (3,400 MT, including decreases of 300 MT), and Australia (1,800 MT). Exports of 30,500 MT were up 3 percent from the previous week and 2 percent from the prior 4-week average. The destinations were primarily to Mexico (13,200 MT), China (4,400 MT), Japan (3,900 MT), South Korea (2,600 MT), and Canada (1,500 MT).

China’s pork imports stay strong to start 2023

China imported 380,000 MT of pork in January and February combined, up 35.8% from the same period in 2022. China’s pork imports increased late last year and are expected to climb this year, especially with the country reportedly fighting a new outbreak of African swine fever.

Why farmers and others should be watching the impact of some failing banks

Smaller banks are likely to respond to recent turmoil in the sector by tightening standards and slowing lending to raise capital ratios. That could make it harder for American families and businesses to get a loan.

China is fighting a resurgence of African swine fever

The deadly disease that previously wiped out almost half of China’s hogs is surging again, potentially raising prices of the nation’s favorite meat. Official data on the virus are hard to come by in China, so traders and analysts use their own surveys to assess the damage. The outbreak was pretty severe in January and February and the latest wave should cut production capacity and push up pork prices in the second quarter, Rabobank said.

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

April lean hog futures--$75.00 to $81.00 and with a sideways-higher bias

May soybean meal futures--$440.00 to $465.00, and with a sideways-lower bias

May corn futures--$6.23 1/4 to $6.50 and a sideways bias

Latest analytical daily charts lean hog, soybean meal and corn futures

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