Lean hog futures are retreating from their best levels in 11 months, driven by uncertainty over foreign exports. US demand remains strong, but with Asian countries potentially reversing their bans on German pork, American farmers might see an uptick in inventories. Lean hog prices are down in 2020, but they have recovered more than 30% since July.
December lean hog futures tumbled $0.0225, or 3.12%, to 69.20 cents per pound at 20:14 GMT on Tuesday on the Chicago Mercantile Exchange (CME). Lean hog prices have been surging over the last three months, rallying 37%. In the last week, pork prices have jumped by 4.2%.
In fact, lean hog futures had been trading at their best levels in nearly a year, buoyed by strong domestic demand for pork. However, with reports that major Asian markets are considering ending their bans on German pork, investors think there could be larger-than-expected supplies coming to market.
Last month, China and other Asian countries suspended German imports of pork when Berlin confirmed cases of fatal pig disease in wild boar. The decision led to widespread speculation that Asian countries would import more US pork.
Has it? According to the US Department of Agriculture, US pork export sales tumbled 56% to 26,800 tons for the week ending October 8. This is also 43% below the four-week average. For the 2021 delivery season, net sales were at 1,600 tons.
So far, the other fundamentals have not changed. Analysts say that the US producers are at slaughter capacity right now, particularly with the coronavirus-related lockdowns. USDA data highlight that the daily US hog slaughter was 489,000 head, which is 2,000 fewer than the same period last year. Processing volumes are nearing pre-pandemic levels.
That said, other market observers believe packers’ slaughter volumes should be running a lot higher than in 2019. Dennis Smith, a commodity broker at Archer Financial, told Reuters:
We’re missing over a million pigs, is what it amounts to. That’s the huge debate.
In other agricultural commodities, November corn futures picked up $0.0375, or 0.93%, to $4.09 per pound. November wheat futures tacked on $0.065, or 1.04%, to $6.335 per bushel. November soybean futures rallied $0.1075, or 1.02%, to $10.65 a bushel.