Increasing demand and squeezed supply have led to the highest hog prices since 2014
By Jackie Clark
As the U.S. and Canada begin to recover from the impact of the COVID-19 pandemic, strong demand for pork combined with a supply squeeze has resulted in soaring hog prices.
“Current prices are the highest we’ve seen since the August of 2014,” said Abhinesh Gopal, head of research at Farms.com Risk Management. Outbreaks of porcine epidemic diarrhea caused a supply shortage in 2014 that inflated prices to record levels.
“Current prices can probably be termed as the second highest peak ever,” Gopal said. This can partly be attributed to “strong demand from multiple factors or sectors.”
Export demand is strong, particularly from China and Mexico.
“The Chinese demand is still strong, because they face continuous setbacks due to African swine fever,” Gopal explained.
The other major customer for U.S. pork has been Mexico,” he added. “They, too, have a bit of a supply crunch and some market analysts are saying that Mexico had to reduce their hog herd after COVID-19 hit … which is impacting them this year.”
The other main factor analysts are observing is the economic recovery from COVID-19, Gopal explained. With the gradual reopening “we have renewed demand from the food service and restaurant sector.”
Recovery from COVID-19 increases both domestic and export demand, he added. In the U.S. “because of the stimulus package, people have money to spend … that is aiding demand, and that is also leading to the likelihood of inflation. There’s a lot of money chasing fewer products.”
In terms of supply, the latest United States Department of Agriculture numbers indicate that the industry is still seeing a supply squeeze from the shutdowns of the meat processing facilities due to COVID-19 outbreaks, Gopal explained.
“All of that effected the supply chain, hence farmers cut back on the expansion (of production). There was some sow herd slaughter,” he said. “As of March 1st 2021, the U.S. all-hogs inventory was at 98 per cent of the prior year, the sow herd was at 97 per cent, the marketing herd was at 98 per cent.”
Each measure of supply was slightly lower year-on-year.
“That report was bullish for prices. You have that strong demand, and supply is trying to catch up,” Gopal said.
Trends in the U.S. are also reflected for Canadian hog producers because the supply chain is so integrated. Elevated prices are likely to continue for the time being.
“We don’t seem to have peaked yet,” Gopal said. Prices declined a little after hitting a high earlier in May, however experts are predicting they will continue to rise.
Factors influencing supple and demand currently “continue to be strong supportive factors,” Gopal said.
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