Pig outlook: Lean hog futures prices continue to rally

US lean hog futures pushed above the $100 mark this month, plus China's sow herd is growing
calendar icon 18 February 2022
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The pig traders’ perspective: The lean hog futures market pushed above $100.00 this month, with the next upside price objective the 2021 high of $123.075, basis nearby futures. The CME lean hog index has surged over $21.00 since the beginning of 2022. The index maintained a roughly $10 to $12 premium over year-ago through January, but that has extended to nearly $17, as slaughter data signals hog supplies are down even more than USDA’s market hog inventories suggested in the December Hogs & Pigs Report. Ongoing wholesale and cash market gains continued to power gains in hog futures.

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

US pork export sales still lagging

Pork: Net sales of 18,300 MT for 2022 were up 1 percent from the previous week, but down 46 percent from the prior 4-week average. Increases were primarily for Mexico (4,800 MT, including decreases of 900 MT), South Korea (3,400 MT, including decreases of 400 MT), Japan (3,300 MT, including decreases of 1,100 MT), Canada (2,400 MT, including decreases of 400 MT), and the Dominican Republic (1,600 MT). Exports of 31,000 MT were up 2 percent from the previous week, but unchanged from the prior 4-week average. The destinations were primarily to Mexico (14,200 MT), Japan (4,900 MT), China (3,500 MT), South Korea (2,600 MT), and Canada (1,700 MT).

USDA’s monthly livestock report

Pork/Hogs: Price forecasts of live equivalent 51-52 percent lean hogs are raised in each quarter of 2022 on tighter-than-expected supplies of slaughter hog numbers early in the year and expectations of continued strong consumer demand for pork. Strong seasonal factors are expected to amplify first-quarter increases, carrying hog prices higher into the fourth quarter of this year. Quarterly pork export forecasts are reduced on lower-than-expected December trade data and expectations for continued recovery of China’s swine sector from disease problems. Total 2022 pork exports are expected to be 6.8 billion pounds, about 3 percent lower than exports last year.

US states implement animal welfare policies covering US pork production

USDA reports several US states have passed farm animal welfare regulations restricting the use of gestation crates in pork production over the past two decades. Regulations are concentrated in states with relatively small pork industries; these policies currently cover 3 percent of U.S. pork production. In addition, two states passed retail sales restrictions that will prohibit the sale of pork originating from animals from gestation crate systems. With relatively low pork production but large populations, these states’ regulations are likely to impact pork production in other states.

China’s sow herd drops in Q4 but still 4% bigger than last year

China’s sow herd fell 2.9% at the end of December compared to the previous quarter, the country’s ag ministry said. But the herd at 43.3 million head was 4% greater than Dec. 31, 2020. China’s pig herd at the end of December was up 10.5% from the previous year, at 449.22 million head and 2.6% bigger than the third quarter.

China targets 15% increase in meat output by 2025

China is aiming for meat production of 89 MMT by 2025, growing by an annual average of 2.8% from the 77.5 MMT produced in 2020, a cabinet document showed on Friday. Under the plan, pork production would be about 55 MMT, with output at 22 MMT for poultry meat, 6.8 MMT for beef and 5 MMT for lamb. The five year plan to modernize agriculture follows a blueprint issued last month for development of the livestock sector over that period.

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

April lean hog futures--$101.00 to $110.00, and with a higher bias

March soybean meal futures--$437.90 to $477.90, and with a higher bias

March corn futures--$6.20 to $6.70, and a sideways-higher bias

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

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