With uncertainty on one side of the border due to NAFTA trade or lack thereof and a big coming together overseas demand and trade issues will determine price and profitability for producers.

Tyler Fulton, the Director of Risk Management with h@ms Marketing Services in Winnipeg said continued strong demand for pork will be a crucial factor influencing hog markets moving toward spring. After an active recovery following the holidays U.S. cash hog markets have settled into a more steady trend. Early in the quarter processors were buying more aggressively, possibly because two or three new plants were operating at close to single shift capacity.

“We never really saw much appreciation in wholesale pork prices, and so that may have made some of them a little bit more cautious, not willing to give up on their margins so early in the year, and the U.S. hog slaughter has moderated,” said Fulton. “We anticipated that based on the latest inventory reports from the USDA. We’re running approximately 2.35 million hogs, maybe 2.45, somewhere in that range which is well down from capacity so we don’t have any issues and we don’t foresee any problems with capacity issues at all in 2018.”

He expects going forward a general tend where there’s tightening numbers. “We’re still going to trend higher than what we did a year ago, but in general there’s a fair amount of predictable seasonality to hog markets, and so we expect that hog numbers will likely decline by roughly 10 thousand per week for probably seven to ten weeks or so,” said Fulton. “We’re dealing with record pork production by large hog numbers, and higher weights so continued solid demand for pork will be critical.”

He says the root of the demand has been mainly in the U.S, domestic market and, with the economy performing well, hopefully, the industry will see further improvements but the wild card continues to be on the export front which accounts for 20 to 25 per cent of all U.S. production.

“If there are any disruptions to that type of trade or any major changes, whether it be on currency or geo-political issues, that could put the pork sector at risk,” he said. “The Trans-Pacific Partnership is an important feature for Canadian hog producers. It will give us a significant advantage in a couple of countries that will likely augment our exports to those countries, but the markets aren’t figuring it into the mix, yet. Because the U.S. pulled out of those talks, it’s not impacting the futures markets which are where we would look to see if there are any changes.”

He added, “On the flip side we’ve got NAFTA which this week we’re going into the sixth round of negotiations and, by the end of this week, we may have an idea as to whether or not they make any significant progress.” Fulton said it is critical to see some progress on NAFTA because if not, the market will likely increasingly factor in the possibility of some major trade disruptions, in particular with Mexico, in that fourth quarter, in that October, November, and December time frame.

Fulton said the earliest the industry would see any major disruption is six months from the time that President Trump would trigger a pullout of NAFTA.

“The concern is that if negotiations don’t go well on this round it elevates the possibility the President would trigger such a pull out and production and markets in the last half of 2018 would be at risk.” •

— By Harry Siemens

Round 7 of the NAFTA renegotiation is set for late February in Mexico before heading back to Washington in March for what is currently scheduled as the final round of negotiations.