Tyler Fulton, with Hams Marketing Services in Winnipeg, MB, said the hog prices continue very depressed with the cash market in the United States struggling to make gains burdened by vast supplies. The reality is packers aren’t back up to 100 per cent capacity. Producers with those extra uncommitted hogs need to negotiate prices daily, and those values are some of the lowest in a decade.
Fulton said the U.S. hog slaughter continues to run at the highest levels at this time of year, with the industry working through the COVID-19 backlog.
He added forward hog contract prices continue to struggle with little opportunity to price hogs. The best weeks left in 2020 are running around that $130 per 100 kilograms, or maybe $135 at best. There’s not a lot of optimism that anything’s going to change over the next five or six months.
Fulton said, based on the most recent USDA quarterly hogs and pigs report in June, the massive year over year increase in the number of hogs available in the U.S. for slaughter continues to pressure North American live hog values. These are hogs coming to market over the next two months or so.
“Those year-over-year increases in the double digits, over 10 per cent larger than year-ago levels,” he said. “Twenty years since any year over year change of that magnitude.”
Fulton said the USDA took the surveys after the lowest slaughter capacity. The plants that shut down in the U.S. dealing with COVID-19 through their labour force cut the U.S. slaughter by one third. Two or three weeks later, the hog producers completed the survey responding to the questions in precisely the way that they usually would, meaning all of that backlog of hogs not getting slaughtered entered the report.
“It probably skewed some of those numbers in a pretty big way that we simply still need to work through over the next two months or so,” he said.
Fulton said prices have remained unprofitable in the last three months with no prospect for any difference in that trend, it’s tough.
He said slaughter capacity is a big concern rolling into the third and fourth quarters of this year things will be tight. With all other things working correctly, he anticipates that hog supplies increased four to five per cent. Applying that against the understood packer capacity to be, it would be very close to being an issue. Layer on any delays and any hiccups in the logistics of things or in-plant processing, the scenario could see a backlog of hogs building, possibly right after the previous backlog from the spring. It’s not a good scenario; this is the reason why such weakness in the fall futures months.

When it comes to consumer demand, Fulton said there are some interesting metrics about demand, really of all products. Maybe take the information with a grain of salt, because never have the stats shown consumption patterns where, by far, consumers are consuming the majority of the product at home.
Some information that showed the demand early on in the COVID-19 outbreak spiked for April, but there isn’t data to display yet to go with it. However, it appears that it has tumbled pretty sharply with consumption still reasonably good, given the restrictions, but prices collapsing.
“And so, when you measure demand in those two ways, both in quantity consumed and then in prices, and it shows a volatile environment for pork demand, specifically,” said Fulton.
When asked how retail pork prices compare against chicken, beef, or other protein products, he thinks pork is well-positioned where everything moved together.
“We see chicken has the lowest price point, and then pork is next, and then beef is typically the highest,” he said. “Initially, all sectors spiked, and then it dropped off fairly quickly. It’s more of a question of what are consumers most comfortable cooking at home?”
Give the economic situation with record unemployment levels; all sectors need to be mindful of managing expectations with what cuts and how much consumers are willing to pay given that their incomes have taken a big hit over the last three months, he said.
Fulton said producers are in a tight spot right now with even more downside price movement. Even a modest price recovery of 10 to 15 per cent, which would be a relatively small improvement, he’d expect some producers to book in the fourth quarter and even early into 2021, to take some of that risk off the table.
He believes there are some conversations about adjustments to the cash prices producers receive because, “We’re going to see some failures and some people leave the industry if we don’t get some improvement soon.” •
— By Harry Siemens