Pig outlook: Train wreck in lean hog futures

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global pig news
calendar icon 13 January 2023
clock icon 3 minute read

The lean hog futures market continued to careen lower this week, with prices hitting a three-month low. Bears are in firm command, to suggest more downside pressure in the futures market in the near term. Meantime, Cash hog fundamentals continued to weaken this week. The latest CME lean hog index is down 48 cents to $75.96 (as of Jan. 10), extending its seasonal price slide. Until cash hog market fundamentals appear to post seasonal lows and start to strengthen, there will be additional downside risk in lean hog futures. Unlike the fall months, when low hog weights suggested supply tightness, hog supplies are plentiful at present. That reflects three weeks of packer operations cutbacks due to holidays. Still, expect seasonal cash and futures price strength in the coming weeks and months—especially with beef prices at historically elevated levels.

Weekly US pork export sales

USDA Thursday reported US pork net sales for 2023 marketing year, which began January 1st, totaled 13,100 MT were primarily for Mexico (4,700 MT, including decreases of 300 MT), Japan (3,500 MT, including decreases of 400 MT), South Korea (1,400 MT, including decreases of 700 MT), Canada (800 MT, including decreases of 400 MT), and the Dominican Republic (600 MT, including decreases of 100 MT). Net sales of 4,000 MT were carried over from the 2022 marketing year, which ended December 31st. Exports of the period ending December 31st of 9,700 MT brought accumulated exports to 1,502,900 MT, down 16 percent from the prior year total of 1,791,700 MT. The primarily destinations were to Mexico (6,000 MT), Japan (1,300 MT), South Korea (600 MT), China (500 MT), and Canada (400 MT).

USDA Making More Investments in Meat Processing

USDA says it is investing more than $12 million to expand independent meat and poultry processing capacity in Ohio, Michigan and Minnesota. Vilsack announced that Meat and Poultry Processing Expansion Program grants will help fund several projects.

For example, in Minnesota, Benson + Turner Foods Inc. is receiving $962,954 to build a 6,788-square-foot cattle and hog processing plant on the White Earth Indian Reservation and storefront near Waubun. The grant will help the company achieve its goal of building a sustainable business that benefits the local economy by using locally grown livestock and providing new opportunities for producers to market their products by providing USDA-certified processing for them.

This is in addition to recent announcements of $74 million in 22 MPPEP projects, $75 million in grants through the Meat and Poultry Intermediary Lending Program, $3.9 million in Value Added Producer Grants, and $5.7 million in Food Supply Chain Loan Guarantees, all supporting meat and poultry processing. These programs are a few of the suite of programs facilitating investment in meat and poultry processing.

FAO food price index continued to drop in December

The UN Food and Agriculture Organization (FAO) global food price index dropped for the nineth straight month and was 1.0% below year-ago. The decline in December was driven by a steep drop in the international prices of vegetable oils, along with smaller declines in cereal grains and meats. Compared to year-ago, prices were up 2.5% for meat, 7.8% for dairy, 4.8% for cereal grains and 0.7% for sugar, while vegoils dropped 19.1%.

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

February lean hog futures--$76.40 to $82.50 and with a sideways-lower bias

March soybean meal futures--$460.00 to $490.00, and with a sideways-higher bias

March corn futures--$6.40 to $6.70 and a sideways bias

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

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