Both disease and economics have shifted global hog markets dramatically in recent weeks. China’s hog prices have fallen -27% over the past month and are now down -48% from their October highs. Also, U.S. and Brazilian hog prices have dipped to become the cheapest hogs on earth. Meanwhile hog prices in both Europe and Mexico hover near record highs.
Hog price hikes in China began in April 2022 after a year of financial losses and liquidation reduced supplies. By July, hog prices were moving sharply higher on the tight supplies. But after significant liquidation in 2021 and early 2022, the hog price drop in October 2022 cannot be explained by increased supply; farmers had only been profitable for 5 months. Thus the drop is most likely explained by falling demand. Recall the mass lockdowns across China in October and November that led to an end of the Zero COVID regulations on December 8th. COVID infections and deaths have soared since then and the hog market has yet to recover. Backlogged hogs are likely, through the recent COVID wave. I expect prices to rebound but may take another 45-60 days for COVID waves to subside and supplies to tighten again.
In the U.S. 4th quarter pork production rose an estimated +6% (from Q3) according to the USDA. That was enough to take prices down -34% from their August highs. So on a global basis, margins are slight in Europe, negative in the U.S., Canada, Brazil, and China. There is no appetite for hog expansion anywhere globally at this time. – Brett Stuart