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Pig outlook: US Lean hog futures bulls fading this week, Prop 12, China's sow herd

Expectations for large US slaughter levels are pressuring the lean hog futures market this week. Meatpackers typically ramp up operations after the year-end holidays.
calendar icon 7 January 2022
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Traders may suspect a supply backlog will undercut the market, or at least slow an anticipated price advance through early winter. Recent weakness in wholesale pork prices also weighed on the futures market. The rapid spread of the Omicron coronavirus variant holds potential to cause packing plant shutdowns to prevent disease spread among their workers. While the CME lean hog index looks to have put in an early seasonal low in late November, the rise from that level has been limited.

Latest US Department of Agriculture reports, and other news

JBS investigation urged by U.S., European lawmakers

US Senate Foreign Relations Committee Chairman Bob Menendez, U.K. House of Commons MP Ian Liddell-Grainger and European Parliament Committee on Agriculture and Rural Development Chair Norbert Lins called for a coordinated investigation into Brazilian-owned company JBS, its parent company J&F Investimentos and subsidiaries in Europe and the United States. “We also encourage our governments to scrutinize JBS’ antitrust and anticompetitive practices and assess whether the company’s abuses could permanently damage food supply chains,” the lawmakers said in a statement.

Biden to fight meatpackers on inflation

President Joe Biden promised to “fight for fairer prices” for farmers and consumers yesterday as he announced plans to combat the market power of the giant conglomerates that dominate meat and poultry processing. “Capitalism without competition isn’t capitalism, it’s exploitation,” Biden said. “That’s what we’re seeing in meat and poultry.” Biden joined USDA Secretary Tom Vilsack and Attorney General Merrick Garland to meet virtually with ranchers and farmers to hear complaints about consolidation in the industry, ratcheting up a campaign blaming anti-competitive practices in the industry for contributing to surging food inflation.

US wants tighter labelling standards for Product of USA meat products

This would hurt large producers and processors that rely on imports in their production process and could fuel tensions with exporters of meat to the U.S. who have often complained of barriers to access the U.S. market. “Under current labelling rules, meat can be labelled ‘Product of USA’ if it is only processed here — including when meat is raised overseas and then merely processed into cuts of meat here. We believe this could make it hard for American consumers to know what they are getting,” the White House said on Monday.

Biden, Vilsack meet with independent producers on concentration in US meat industry

President Biden, USDA Secretary Tom Vilsack and Attorney General Merrick Garland are announcing “the Biden-Harris Administration’s Action Plan for a Fairer, More Competitive, and More Resilient Meat and Poultry Supply Chain,” the White House said in a media advisory. The announcement will take place during an online meeting that the White House said will be held “with family and independent farmers and ranchers to discuss his administration’s work to boost competition and reduce prices in the meat-processing industry, where corporate consolidation has led to rising prices for consumers and lower earnings for farmers and ranchers.” The White House said, “The meat producers will talk about the challenges they have faced as large conglomerates have absorbed more and more smaller processors.”

“The attorney general and the secretary of Agriculture will also attend and explain the steps the administration is taking to increase processing options for farmers and ranchers and to create fairer and more competitive markets. Vilsack will continue his aggressive work to tackle the causes of the higher prices American families have been facing.

“The president will explain that under his July Executive Order on Promoting Competition in the American Economy, the administration has been focused on tackling the lack of competition in agricultural markets. A small handful of meatpackers control the majority of the markets for beef, pork, and poultry, enabling them to squeeze farmers and ranchers while also raising prices on consumers.”

Bottom line: Antitrust actions remain in focus. Agriculture remains one of the focal points for the Biden administration on this front, with today’s virtual meeting aimed at discussing the administrations’ efforts to boost competition and reduce prices in the meat processing industry. The officials will listen to complaints about consolidation in the industry, while launching a new portal to allow farmers and ranchers to report unfair trade practices by meatpackers.

California law on animal cruelty to impact US pork industry

California’s Prevention of Cruelty to Farm Animals Act, also known as Proposition 12, took effect on Saturday that is expected to have major impacts on the pork industry and product prices. The law establishes minimum space requirements for farm animals and prohibits the sale of meat from animals raised in housing that doesn’t meet its specifications. Sources note a petition by NPPC and Farm Bureau on Prop 12 is scheduled for a Supreme Court conference on Jan. 7. “There is a high likelihood they [Supreme Court] will have an initial discussion in conference on Jan. 7, then wait until Jan. 14 to make a final decision on taking the case or not. If they do that, we would find out likely at about 9:30 am ET on Tuesday, Jan. 18,” a contact detailed. “The court isn’t deciding the case, they are merely deciding whether to take the case up.”

China’s sow herd up 4.7% from last year

China’s sow herd at the end of November was 4.7% higher than the previous year at 42.96 million head, the country’s ag ministry reported, though down 1.2% from October. China slaughtered 235.9 million hogs in the first 11 months of 2021, up 66.1% from the same period the previous year, amid rapid expansion of the hog herd after the African swine fever outbreak. Rising output and oversupply have caused pork prices to plunge this year and pushed hog margins to negative territory.

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

February lean hog futures--$77.50 to $84.675, and with a sideways bias

March soybean meal futures--$395.00 to $425.00, and with a sideways-higher bias

March corn futures--$5.84 3/4 to $6.20, and a sideways-higher bias

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