The lean hog market is exhibiting robust bullish momentum, defying expectations set by the recent USDA Hogs and Pigs Inventory Report. This report projected sow herd expansion, typically a bearish indicator. This article dissects the key drivers behind this price surge and explores the potential trajectory of the market in the coming months.
Market Dynamics:
- Robust Demand: Despite USDA data suggesting increased hog production, demand for pork remains robust. This is evidenced by the National Negotiated Lean Hog price reaching a one-year high last Friday. Additionally, pork cut-out values surpassed $100 per pound for the first time since September 2023, indicating a strong consumer offtake.
- Contractionary Global Supplies: China’s ongoing sow herd liquidation is anticipated to result in significantly reduced global hog supplies later this year. This impending supply shortage is likely a major factor propelling the current price appreciation in the lean hog market.
- Feed Cost Considerations: While corn prices experienced a recent dip following a USDA report indicating reduced planting acreage, they remain a significant cost factor for hog producers. The lack of government support programs for the pork industry, compared to the established programs for the corn-soybean complex, is a point of contention within the industry.
Canadian Hog Production:
- Downward Revision: A recent USDA GAIN report revised Canadian pork production forecasts downward for 2024. This revision is attributed to heavier carcass weights and processing limitations in Eastern Canada.
- Sow Herd Dynamics: The Canadian sow herd is experiencing a decline, particularly in Eastern Canada. However, Western Canada witnessed a slight increase despite processing cutbacks by Olymel, a major pork processor.
Global Disease Outbreak:
Japanese Encephalitis Virus: An outbreak of this mosquito-borne disease impacted Australian piggeries in 2022, leading to substantial production losses. The industry’s successful response to this foreign animal disease episode underscores the importance of robust biosecurity protocols and preparedness plans.
Market Outlook:
The lean hog market is positioned for continued upward movement in the near term, driven by robust demand and anticipated supply constraints arising from China’s sow herd liquidation. However, feed costs remain a potential headwind for producers. Close monitoring of global supply dynamics and evolving consumer demand patterns will be crucial for informed decision-making in the lean hog market.
Lean Hog Long (Buy)
Enter At: 91.200
T.P_1: 93.075
T.P_2: 96.650
T.P_3: 98.975
T.P_4: 101.975
T.P_5: 104.000
T.P_6: 106.450
T.P_7: 108.825
T.P_8: 111.675
S.L: 79.525
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