EPISODE 20

More Upheaval for the Pork Industry in 2021?

March 2, 2021
Mark Hanson, commodity manager for CHS Hedging, shares insights about the long-term outlook for hog markets. 

Will market turbulence in the pork industry linger through 2021? The tug-of-war between demand and higher input costs is expected to continue, says Mark Hanson, CHS Hedging commodity manager. He points to two key trends that should be on producers’ radar. 

“The first trend to watch is Chinese demand, which has been robust and needs to remain that way in 2021. The second is how an end to the pandemic will affect the domestic market,” says Hanson. “There are expectations of strong demand domestically, but we don’t know how strong that demand will be after the economy reopens.”

Several factors will affect hog prices this year, Hanson says. Cutouts – led by hams and bellies – are trading at more than $91, the strongest prices since October 2020. There has also been a consistent trend of cash being a discount to the futures, with a spread of roughly $7 to $11. “The question,” says Hanson, “is whether that will continue. As long as we have strong demand, we think the cash is going to come back up to the futures.”.   

There is some uncertainty in the Chinese hog market, specifically due to recent outbreaks of African swine fever, as the country recovers from having reportedly lost more than a third of its swine population. U.S. production volumes are also under some pressure from disease concerns including PRRS and PED. “We’re hearing that some barns are empty, but we’re not sure if that’s due to disease or if higher input costs are scaring people away. That’s something we’ll have to watch over the next several months.” Early weaners are trading around $70 — about $10 higher than a year ago — which could indicate a tightening of supply, he adds.

Hog prices have kept up with higher input costs and as long as that relationship stays in check, things should remain stable, says Hanson. “Hog prices have been a bit stronger than corn and soybean meal prices to this point, which is interesting. But that certainly stresses the point that proper risk management will be vital for pork producers in 2021.”

Three pigs behind a wire fence

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