Hog outlook: Lean hog futures bulls are back in business
The pig merchant’s point of view
August lean pork futures prices hit a three-week high this week and rebounded sharply from the June low, suggesting more upside actions on short-term prices.
The lowest US hog slaughter levels of the year coupled with strong consumer demand are expected to continue to push prices up. Pork production in the week ending July 10 fell 16.2% from the previous week (although this includes downtime during the holidays), with average hog weight plunging to 21 lb for the week.
Recent reports of new cases of ASF in China have once again heightened attention to Chinese demand, but an increase in Chinese pork production in the second quarter could weaken near-term export prospects. Nonetheless, good retail and consumer demand in the United States at the moment, along with good ongoing supplies, suggests that the spot and futures markets may continue to rise.
The likely high-low price ranges for next week
- August Lean Pork Futures – $ 102.10 to $ 110.00 and with a higher bias
- December soybean meal futures – $ 355.20 to $ 383.50, and with a higher sideways bias
- December Corn Futures – $ 5.20 to $ 5.80 and higher sideways bias
Latest USDA News
USDA predicts increase in global pork production
The US Department of Agriculture said this week in its monthly supply and demand report that global pork production for 2021 was revised up almost 4% from April to 105.1 million tonnes. , mainly due to higher production in China which was increased by 8% to 43.8 million tonnes.
Since the beginning of 2021, the slaughter of pigs in China has been significant and the weight of carcasses is higher. The rebound in pork production at a time of weak seasonal demand caused prices to plummet rapidly, leading to liquidation of animals as Chinese producers sought to protect their margins. However, the reported culling of breeding animals, persistent productivity issues and lower producer margins are expected to slow Chinese production growth later in the year.
Global pork exports for 2021 are revised up 2% to 11.8 million tonnes on higher estimates for all major exporters. Chinese imports continue to support world trade and are increased by 3% to 5.0 million tonnes. Meanwhile, Philippine imports are revised up 21% to 425,000 tonnes due to lower tariffs and a supply gap induced by ASF. Mexican imports increased by nearly 3% to 985,000 tonnes due to high domestic prices, a stronger peso and offsetting strong exports.
Weekly sales of pork exports to the United States disappoint
USDA announced Thursday morning that reported 2021 US pork net sales of 10,600 metric tonnes (MT) were down 76% from the previous week and 68% from the previous four-week average. .
Increases mainly for Mexico (5,300 MT, including decreases of 1,100 MT), Japan (3,100 MT, including decreases of 200 MT), Honduras (900 MT), Colombia (800 MT, including decreases of 100 MT) and Chile (500 MT), were offset by reductions mainly for China (1,300 MT).
Exports of 25,200 MT – a low in the marketing year – were down 17% from the previous week and 25% from the average of the previous four weeks. The destinations were mainly Mexico (11,400 MT), China (4,900 MT), Japan (3,500 MT), Canada (1,300 MT) and South Korea (1,200 MT).
USDA provides details on animal slaughter / disposal assistance
Livestock and poultry producers who suffered losses during the COVID-19 pandemic due to insufficient access to processing can now apply for assistance for those losses and the cost of depopulating and disposing of animals, the USDA announced Tuesday, July 13. It’s part of the Livestock Pandemic Compensation Program (PLIP) unveiled by Secretary of Agriculture Tom Vilsack in Wisconsin Dells. Producers can apply for assistance from July 20 to September 17.
Payments will be based on 80% of the fair market value of the livestock and poultry and for the cost of slaughter and disposal of the animal from March 1, 2020 to December 26, 2020. Payments will be based on a single payment rate per head.
The USDA details, “PLIP payments will be calculated by multiplying the number of eligible cattle or poultry by the payment rate per head, then subtracting the amount of any payment that the eligible livestock or poultry owner received for the disposal of livestock or poultry under the environmental quality incentive program of the Natural Resources Conservation Service or a state program. Payments will also be reduced by any Coronavirus Food Assistance Program (COFOG 1 and 2) payments paid out of the same inventory of pigs that have been depopulated.
The USDA said it has set aside “up to $ 50 million in pandemic assistance funds to provide additional assistance to small pig producers who use the spot market or negotiate prices.” Details on additional targeted assistance are expected to be available this summer. “
Eligible livestock must have been depopulated from March 1, 2020 to December 26, 2020, due to insufficient access to processing due to the pandemic. Cattle must have been physically located in the United States or on United States territory at the time of depopulation. Eligible livestock owners include natural or legal persons who, on the day the eligible livestock was depopulated, legally owned them. Packers, live poultry dealers and contract producers are not eligible for PLIP.
PLIP payments compensate participants for 80% of both the loss of eligible livestock or poultry and the cost of depopulation and disposal on the basis of a single payment rate per head. PLIP payments will be calculated by multiplying the number of eligible livestock or poultry by the per capita payment rate, then subtracting the amount of any payment that the eligible livestock or poultry owner received for disposal of the. livestock or poultry as part of natural resources. Conservation Service (NRCS) Environmental Quality Incentives Program (EQIP) or state program. Payments will also be reduced by any Coronavirus Food Assistance Program (COFOG 1 and 2) payments paid out of the same inventory of pigs that have been depopulated.
There is no payment limit per person or legal entity on PLIP payments. To be eligible for payments, a natural or legal person must have an average adjusted gross income (AGI) of less than $ 900,000 for the 2016, 2017 and 2018 tax years.
News from the pork industry in China
Chinese pork production hits highest level in seven years
In the second quarter of 2021, pork production in China reached a seven-year high of 13.46 million metric tons (MMT), up 40% from the second quarter of 2020 and well above of the usual 10 MMTs produced for the quarter, according to a Reuters analysis of data from the National Bureau of Statistics of China.
The bureau said Chinese pork production jumped 35.9% from last year in the first half of 2021 to 27.15 MMT. It also reports that China slaughtered 337.42 million pigs in the first half of 2021, a jump of 34% from last year. Normally, the second quarter is a period of low consumption and production, but this year large producers have increased their production as a result of African swine fever (ASF).
Sales data from 16 listed pig producers showed they produced 42.8 million pigs for slaughter in the first half of 2021, more than a 100% increase from the previous year, Boya Consulting said in a report released Wednesday. Some provinces are still struggling with ASF outbreaks, speeding up slaughter and encouraging others to produce overly heavy hogs that hit the market during the April to June quarter. The Chinese Bureau of Statistics reports that the Chinese pig herd stood at 439.11 million head at the end of June, up 29% from last year.
China’s meat imports increase
China imported 743,000 tonnes of meat in June, down 17% from levels last year, according to Chinese customs data. It was also a 5.8% decline from shipments of 789,000 MT in May.
Weak domestic pork prices dampened import demand from China. For the first half of 2021, China imported 5.08 MMT of meat, so far exceeding last year’s 4.75 MMT by 6.9%.
China lifts restrictions on small pig farms
China’s agriculture ministry has announced that it will no longer require small pig farms to receive environmental approval from the government before raising pigs. It’s part of China’s continued efforts to rebuild its pig herd after African swine fever halved the country’s pig herd.
The epidemic has hit small producers particularly hard, with falling pork prices this summer forcing small producers to close their doors. There is still no vaccine for the virus, and ASF outbreaks continue in northern China and southwestern Sichuan province.