US Slaughter Hog Glut Causes Deeper then Expected Price Declines

4 November 2016, at 12:00am

The Director of Risk Management with [email protected] Marketing Services says the glut of hogs available for slaughter in the US has caused a much steeper than expected decline in live hog prices as processing plants reach capacity, writes Bruce Cochrane.

Large numbers of hogs available for slaughter in the US have resulted in increasing pressure on North American live hog prices.

Tyler Fulton, the Director of Risk Management with [email protected] Marketing Services, says US slaughter hog numbers have reached or exceeded what was thought be US processing capacity.

Tyler [email protected] Marketing Services:

We're seeing that typical seasonality where the cash hog prices tend to decline from the peak in the summer to some of the lowest prices of the year in November and December.

But the decline that we've seen this year has easily exceeded expectations and beyond the seasonal norm.

In fact, depending on which cash market region you reference, we're now seeing cash prices that are hovering in the mid 40s per hundredweight US and that takes us to the lowest levels that we've seen in several years.

It's kind of part of that seasonal influence that you expect to see every year but we are taking it up to a whole other level.

We've now seen several weeks that have matched or exceeded 2.5 million hogs in a week, which previous to this point, was thought to be the weekly capacity of the US industry so we're dealing with packers that are fully utilising their facilities.

Fulton says the next two months will play a critical role in determining how 2016 is viewed in history.
He says, given that we're so close to packer capacity, the margin for error is quite slim and the price implications are significant because of the packer capacity issue.