Pork Market Update 11/19

Hog prices in October continued upward from the improvements in September, getting as high as $78/cwt and putting producers in an excellent margin situation, making double-digit profits. This was a welcomed scenario to growers after 11 of the prior 12 months in the red. The stronger hog valuations were a direct result of this summer's backlog of hogs now through the queue just before September started, and a tightening of the herd through thinning the piglet supply ahead of the summer with those hogs coming to market now. Harvest levels the last seven weeks are trailing slightly below last year, on a par to last year, at best, when the hog & pigs inventory report suggested more than 6% over last year would be available now. The tightened hog supply is helping to keep producers in good margin for now, and should continue to do so for the remainder of 2020. As 2021 comes into view, the next round of hogs to market is expected to be at a decrease of more than 3.5% from the start of 2020, and will help to further support hog valuations and the subsequent margin component for producers, keeping them motivated in the marketplace.

Hams: Ham prices were volatile last week, with mixed results, all on the final plays for product positioning going into the upcoming holiday. Last week was likely the last for any degree of strength, but nothing major materialized, as labor was likely not there to process all the hams coming through the harvest, which kept product moving. Do not look for price increases this week, as time is eroding to get hams through the smokehouses before Thanksgiving. Look for easing the next two weeks, albeit more akin to softness without breaking down. Hams will be on the offensive again coming out of the Thanksgiving holiday for year-end holiday preparedness, but new highs are not expected. Hams should not eclipse $80, on average, the remainder of the year even if there is any unexpected strength. When hams can no longer get processed for Christmas or New Years' delivery, expect successive weakness in the complex.

Bellies: Overall belly values continued lower last week, but certainly slowing from the prior two weeks of aggressive price reset. At a price point well below last year and the average, the $100 level represents an inability for extra bacon processing at the moment, in the final throws of labor for the Thanksgiving holiday preparedness at processing plants as the present focus. Extra bellies that cannot get processed right now are clearing the market, and they are certainly at a price point typical of seeing cold storage intent. Bellies can go into rotation in December at $115, a few weeks earlier at just above $100 is plausible right now. Bellies are not likely aggressively risk higher in the next five weeks, as harvest levels still have not peaked yet for this season. .

Butts: Butts continued to find buying interest off the lows from two weeks ago, when they became the value play, and yet in the upper $80s are still a 5% discount to last year. Butts are likely to see some featuring at retail over the next two months and will be a preferred option over bone-in and boneless loins. Without a strong cold storage rotation at this time of year expected yet for butts, the consistent volumes should keep butts on the lower end of the current spectrum, not forecast to get above $100, unless China steps in stronger than expected during December. Prices are not expected to retrace to the recent lows below $80. Anything in the low $80s for the next two weeks should be considered a favorable price point, but may not happen.

Ribs: Spareribs were sideways last week, with a slight degree of support and interest as buyers ensure product for the upcoming holiday in two weeks. This will keep extra product relatively tight for the short term, and any easing that was in play will take the backseat for now. Post-holiday, there should be some additional easing on the spareribs, along with the entire rib complex, as the consistent harvest levels stay ahead of fresh demand. The low levels in cold storage will warrant rotation and a desire to put ribs away, which will support the rib complex from major easing or significant price breakdown. Ribs could ease 10-12%, at best. from current levels the first two weeks of December. Do not look for huge price increases anytime soon.

Trim: Fat pork trim continued easing last week, because of the consistent harvest levels the last few weeks, with lower volumes of fat trimmings required in product formulations, compared with lean trimmings. The majority of the seasonal price reset is complete over the last five weeks now. Lean trimmings are subject to fresh-only demand at this time of year, and while processing for sausage product is currently strong, the hogs are slightly fattier this season and harvest levels are at their seasonal peak over the next four or five weeks. There is limited, if any, upward price risk, with the forecast expecting minor easing from here over the next six weeks, just holding above the five-year average.

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