Pig outlook: US Lean hog futures prices recover this week

Analyst Jim Wyckoff shares highlights from the global protein market
calendar icon 15 April 2022
clock icon 4 minute read

The pig traders’ perspective: The CME lean hog index was up 9 cents at mid-week. While that’s not enough of a gain for market bulls to get too excited about, it ended a nine-day slide in the cash index. However, it will take multiple days of price gains to signal a low is in place and the index is on its way to a seasonal peak sometime during summer. Persistent cash market weakness continued weighing on hog futures. Bulls are disappointed because the traditional spring cash market rally regularly begins well before mid-April. The cash index appears to be bottoming.

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

US pork export sales up

USDA reported Thursday US pork net sales of 24,000 MT for 2022 were down 42 percent from the previous week and 26 percent from the prior 4-week average. Increases were primarily for Mexico (6,100 MT, including decreases of 500 MT), Japan (5,400 MT, including decreases of 200 MT), China (4,000 MT, including decreases of 200 MT), South Korea (2,600 MT, including decreases of 300 MT), and Australia (1,900 MT). Exports of 31,800 MT were up 10 percent from the previous week and 11 percent from the prior 4-week average. The destinations were primarily to Mexico (14,200 MT), Japan (4,700 MT), China (4,300 MT), South Korea (2,900 MT), and the Dominican Republic (1,100 MT).

China’s meat imports plunged in March

China imported 594,000 MT of meat in March, down 42% from last year’s record. Its meat imports during the first three months this year at 1.7 MMT fell 37% from the same period last year. The preliminary data doesn’t give specifics of meat imports by category, but the sharp drop was driven by a significant decline in pork arrivals as domestic pork production has surged as the country aggressively rebuilt its herd after the African swine fever outbreak.

Worldwide pork production to rise this year

Global pork production is forecast by USDA at up nearly 3 percent year-over-year in 2022 at 110.5 million tons primarily on higher output in China. Hog inventories in China continued to grow during 2021 and were reported at nearly 450 million head – up 11 percent year-over-year. This should support China pork production in the first half of the year as these animals are marketed. However, currently high input prices and relatively weak pork demand have pressured producer margins, taking a financial toll on hog operations and making it likely that output growth will slow later in the year.

Overall, China pork production is forecast at 51.0 million tons in 2022, 7 percent higher than 2021. In a global context, this will offset tighter supplies in the European Union, where a long-term trend of declining consumption coupled with slowing export demand drove producer margins down last year. This has led the breeding herd to contract by more than 3 percent. Even with continued growth in sow productivity, EU pig supplies will be lower as a result, pushing pork production 2 percent lower year-over-year to 23.2 million tons.

Global exports are expected at 11.7 million tons in 2022, 4 percent lower year over year as contracting China and Philippines imports more than offset growth elsewhere. China imports are forecast to decline 19 percent in 2022 as domestic production continues to grow and consumer demand remains relatively weak. Meanwhile, Philippines imports are forecast down 18 percent due to the expiration of expanded tariff rate quota volumes and lower tariffs. On the other hand, rebounding foodservice business is expected to spur South Korea imports 12 percent higher.

Mexico imports are expected to remain firm, growing 4 percent, as pent-up consumer demand and recovering foodservice business supports consumption. U.S. production and exports: U.S. production is forecast at 12.3 million tons in 2022, 2 percent lower than 2021, as lower hog inventories and farrowing intentions lead to tighter pig supplies for the remainder of the year.

Meanwhile, tight domestic pork supplies and correspondingly high prices will weigh on U.S. exports while lower imports from China will increase competition in other Asian markets. U.S. exports are forecast to decline 6 percent year over year to just under 3.0 million tons.

China to buy more pork for reserves

China’s state planner will buy another 40,000 MT of frozen pork for state reserve – its fourth round of stockpiling this year. The move is an effort to support domestic prices, which have fallen sharply. While lower pork prices are helping ease consumer inflation, they are squeezing hog production margins. China has previously purchased 118,000 MT of pork for reserves, though that’s a small fraction of its annual production, which reached 53 MMT last year.

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

June lean hog futures--$112.20 to $120.00, and with a sideways-higher bias

May soybean meal futures--$448.10 to $480.00, and with a sideways bias

May corn futures--$7.50 to $8.00, and a sideways bias

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

Sarah Mikesell


Sarah Mikesell grew up on a five-generation family farming operation in Ohio, USA, where her family still farms. She feels extraordinarily lucky to get to do what she loves - write about livestock and crop agriculture. You can find her on Twitter or LinkedIn.

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