Quarterly update: Happy days again for pig producers

 

Dr John Strak, Whole Hog

via Pig Progress - Apr 5, 2021          

 

The year 2021 has started with a few surprises in the global pork market – prices have risen much more quickly than expected in the USA and Europe – and have fallen rather more quickly in China. Pig market expert Dr John Strak shares his quarterly views.

 

This recovery began in the USA at the end of January and then spread to Europe in the beginning of March. The contraction of herds and numbers of market pigs in these 2 regions has been significant. In China, the surprise is that the official forecasts of increased pig production seem to have been accurate.

 

Slaughter numbers have jumped in China (albeit the data immediately after Chinese New Year show a fall) and prices have tumbled. We need to unpack these data in order to see if anything fundamental has changed since I last wrote about the global scene in this column (late December 2020).

 

Pig market changes in the USA

 

In the USA it definitely seems that something has changed. As Figure 1 shows, pig prices there took off in February and March. Figure 2 puts the hike into a longer term context – and underlines that this early 2021 price movement is unusually large. Whilst prices would be expected to show a seasonal recovery, the early 2021 bounce in US hog prices goes well beyond that.

 

This hike in prices is likely to have been supported and encouraged by the cutback in numbers of available carcasses in Europe. That availability has been restricted by reductions in pig numbers and/or the availability of slaughter options when individual plants have been hit by Covid-related restrictions. This latter effect, of course, could not have been foreseen (except under the general view that Covid-19 seems able to mess up all forecasts for all activities).

 

But, as Table 1 shows, the March census of US pig numbers records significant cuts in the numbers of breeding animals and market pigs in the USA and these will have been the main driver on the supply side for this New Year and the 1st quarter boost in US hog prices.

 

The reductions in animal numbers reported in the census reflect the low prices and margins in the 3rd and 4th quarters in the USA – and the generally pessimistic experience of prices in the 2nd half of 2020, and outlook for the 1st half of 2021. US farmers, it seems, decided to cut back. On the demand side there doesn’t seem to be any shift in demand from overseas in late 2020/early 2021 that would explain the firming of US prices since US pork exports were slipping back in the 4th quarter of 2020 and January 2021.

 

Pig prices in Europe ...

 

Spanish herd hardly changed in size ...

 

China’s pig herd and ASF ...

 

Interpretation of pig price movements ...

 

Pork drawn from the cold stores ...

 

Driving rising prices in the 2nd half of 2021 ...

 

more, including table, charts [6]

https://www.pigprogress.net/World-of-Pigs1/Articles/2021/4/Quarterly-update-Happy-days-again-for-pig-producers-730314E/