Lean hogs prices up over 125% in a year, is there more to come?


James Norris, The Armchair Trader

15th July 2021


The first quarter of this year saw a surge in many commodity prices, on the back of growing market expectation of a post-Covid recovery in the global economy. But in the lean hogs market, other factors were in play as well.


Lean hogs futures had gained 45% in part because of the devastation of China’s hog herds caused by African swine fever (ASF), which had first hit Chinese herds in August 2018 and which has continued to plague China’s pig production ever since.


African swine fever drove prices in first half


China, which is both the biggest producer and consumer of pork, tackled the ASF crisis with drastic measures and culled something like 200 million pigs, or about one third of China’s pig population, with obvious consequences for the global pork market. At the end of 2020 came news of yet another outbreak of ASF, despite the mass culling, when farmers rushed to sell their stock. From January 2021 to the end of June 2021 live hog prices fell by almost 65%, due to increased slaughter, falling demand and a glut of pork on the market.


Meanwhile, in the US, demand for pork jumped, in particular from China. In May, lean hogs for July delivery on the Chicago Mercantile Exchange reached $1.1250 per lb, the highest in almost seven years. Over the year, prices had surged 127%, with most of the gains in the second quarter of this year.


But as veteran observer of the market Jim Wyckoff noted, history shows meteoric price gains do not last for long. By mid-June, live hog and pork prices had dived on reports that China’s sow herd had been rebuilt to 98% of its pre-African swine fever levels, raising fears of a major slowdown in Chinese pork purchases.


Chinese demand for lean hogs still holding up ...


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