Cash prices for slaughter-ready hogs are tumbling, and many credit the decline to the cumulative effects of higher pork production and rising tariffs by major pork export markets.
The average cash price paid by pork packers in Iowa and Southern Minnesota last week was $38.89 per cwt, said the Livestock Marketing Information Center after crunching USDA data. This was down $3.69, or 8.67%, from $42.58 the previous week and $30.85, or 44.2%, below the $69.74 price seen in the same week last year. It was %43.05, or 52.5%, below the 2012-2016 average of $81.94.
Prices for butcher hogs last year were below the previous five-year average, too, but this was because of rising production. This year, retaliatory tariffs from President Trump’s tariffs on other goods imported by the US are being blamed for the added shortfall, especially over the last two months.
An announced preliminary agreement with Mexico Monday reduced the tariff worries from that part of the world, but cuts in China’s US pork imports remain a major concern to the pork industry. By extension, the beef industry also is worried about the spillover pressure of rising pork stocks on beef prices.
Three announced cases of African Swine Fever in China had many hog market investors hoping that China would come knocking for US pork to fill the void created by the disease. While there is no cure or vaccine, and ASF is nearly 100% fatal to domesticated hogs, there is no evidence that US pork packer phones have started ringing yet with calls from China.
It would take time for the disease to spark a lot of new import interest, and many have speculated that China’s up-front publication of the disease outbreak is one way to show the world that “we can handle this.”
OPTIMISM WANING
In fact, market hog prices have tumbled so much in the last two months ($55.78 per cwt) that some are questioning the old adage that lower prices cures low prices, said the Livestock Monitor, an LMIC newsletter to Extension offices. And the current low prices may be needed to minimize the amount of pork going into cold storage by making pork cheap enough to overcome the higher tariffs.
The USDA’s National Agricultural Statistics Service estimate of the mid-2018 hog population shows that high production levels already are baked onto supply/demand for the next 6 to 9 months. Breeding inventory was up 3%, and farrowing intentions were up 2% for September through November, in line with market expectations.
The LMIC said it was forecasting fourth-quarter commercial pork production to be up 5%, followed by gains of 1.5% and 2.4% in the first and second quarters of 2019.
CATTLE, BEEF RECAP
280 head of fed cattle traded last Wednesday on the Livestock Exchange Video Auction at $109.50 per cwt, down from the last sale at $110.07 three weeks earlier.
Cash cattle traded last week at $109 to $109.50 per cwt on a live basis, steady to down $1 from the previous week. Dressed business was done at $172 per cwt, down $1 to $2.
The USDA choice cutout Tuesday was down $1.10 per cwt at $212.53, while select was off $0.44 at $204.41. The choice/select spread narrowed to $8.12 from $8.78 with 76 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday, was $150.60 per cwt, down $0.04. This compares with Tuesday’s Aug settlement of $149.35, down $0.87 and the Sep settlement of $149.52, down $1.15.