Higher anticipated U.S. pork production combined with uncertain export demand is expected to put increasing downward pressure on live hog prices heading toward the fourth quarter.
The USDA’s Quarterly Hogs and Pigs Report, released Thursday, revealed a higher than anticipated level of growth, in the neighborhood of four to five percent more pigs, than one year ago.
Tyler Fulton, the Director of Risk Management with h@ms Marketing Services, says the report indicates increasing production, probably in response to increased U.S. packing capacity which will mean more hogs coming to market as early as this winter resulting in the market dropping by more than two dollars U.S. per hundredweight since the report was released.
So far this year and for that matter for the last several years the domestic U.S. market has been very very good. The domestic consumer has been increasing their demand for U.S. pork and that makes up the majority of consumption and makes up the majority of the price.
The export side represents something in the neighborhood of around a quarter of total U,S. production and that’s a lot more uncertain given the trade disputes that have developed over the last three months or so. With concerns over volume going to China, volume going into Mexico and with the tariffs relating to those two destinations this increase in supply that we’re anticipating may be very difficult to clear the market without significant price discounts.
Generally speaking the expectation is that we’ll be able to move through that glut of supply or that heavier supply but the questions is really at what cost. How much is the price going to need to be discounted in order to clear the market.
~ Tyler Fulton, h@ms Marketing Services
Fulton says when those two key U.S. markets are being taxed it will be more of struggle to move that extra volume of pork without significant price concessions.
