Ham And Belly Price Gains Underpin Cutout

Wholesale pork prices continue to move higher as some buyers have been caught short. Much of the recent increase in price is due to higher belly prices but loin and ham prices have seen a notable seasonal increase.

Steiner and Company produces the Profit Maximizer report on behalf of National Pork Board based on information we believe is accurate and reliable. However neither NPB nor Steiner and Company warrants or guarantees the accuracy of or accepts any liability for the data, opinions or recommendations expressed.


  • Wholesale pork prices continue to move higher as some buyers have been caught short. Much of the recent increase in price is due to higher belly prices but loin and ham prices have seen a notable seasonal increase.
  • Hog slaughter was higher than anticipated as packers have enjoyed higher margins and look to fill orders from customers that are short product. Hog carcass weights are trending down, suggesting producers remain current. This should continue to underpin hog/pork prices in the very near term, but expectations are for prices to ease lower as supply continues to increase in the fall.
  • Ham prices pulled back last week but with big sales reported to Mexico that may be short lived.
  • Lower retail prices and consumers trading down have supported loin sales to this point. Loin prices are expected to be lower in the fall on higher supply.

Full Report

Pork Cutout Climbs On Seasonal Demand, Short Bought Buyers, Lack Of Frozen Supply

Over the past two months, the value of the pork cutout has increased due to higher prices for bellies, hams, and fresh pork. Some of this increase may be attributed to seasonal factors such as lower supplies and increased demand for bacon and fresh pork. However, there are also indications that buyers may have misjudged the situation by having lower than usual inventory and speculating on a potential demand impact from the implementation of Prop 12.

During this two-month period, the pork cutout has risen by about $32 per hundredweight (+40%), with 70% of that gain attributed to higher belly prices. The value of the belly primal has surged to $214 per hundredweight, which is a remarkable 200% increase compared to two months ago. Other pork prices have also risen, with loins up by 18% and hams up by 30%.

Futures currently predict a significant decline from the current price levels heading into the fall. The spread between the October contract and the current CME index indicates seasonal factors are at play, just as they were in June and July. Hog slaughter numbers have been increasing, and by early October, weekly hog slaughter is expected to rise by 8.5%. Additionally, the average weight of barrow and gilt carcasses is expected to climb by 2.8% in the same period, resulting in an approximate 10% swing in pork supplies from current levels.

Despite the expected shifts in supply, there remain several unanswered questions about demand. Bellies play a significant role, but hams are crucial for the fall market. The demand for ham primal is closely tied to domestic holiday demand and exports, particularly to Mexico. Sales to Mexico in the spring supported ham values, but the recent high prices may have impacted sales in recent weeks. However, it seems that export buyers took advantage of the price drop to place more orders, suggesting that ham exports will continue to be well supported heading into the fall.

Regarding domestic demand, it is believed that Prop 12 will not have as significant an impact on hams as it might on other pork items like bellies, loins, and butts. Cooked hams have become more common for holidays, and cooked ham sales in California do not need to be Prop 12 compliant. Moreover, current inventory levels are not overly burdensome, and more supply will be required to meet fall demand.

Considering all these factors, the futures market is currently pricing a $90 ham market for October. This is more conservative compared to last year’s peak of $110 for ham values, but it is still seen as a reasonable outlook for the item at present.

Pork Cold Storage Supply

In recent weeks, there has been a lot of discussion about inventory building ahead of Prop 12, but the data does not seem to support this notion. In fact, pork inventory depletion in June was larger than in previous years. Concerns about Prop 12 eligibility and higher prices might have contributed to this situation.

By the end of June, the total amount of pork in cold storage was 490.2 million pounds, which is 9.1% lower than the previous year and 6.5% lower than the five-year average. The inventories experienced a significant decline of 7.8% compared to the previous month, while the average decline over the past five years was 3.9%.

Typically, ham inventories increase in June, but last month was an exception, with inventories only slightly higher than in May and now 1.2% lower than the previous year. This could be seen as a positive sign for ham values in the third quarter.             On the other hand, belly inventories declined by 14.5% compared to the previous month. Although the inventory drawdown in June averaged 9% over the past five years, belly inventories started from a much higher level and are still about 33% higher than a year ago. Despite this, the larger inventories do not appear to be a problem currently as those who own the supply are likely looking to support California demand in the coming months.

Pork ribs inventory saw a sharp decline as users took advantage of the price increase and cashed out of their positions. By the end of June, total rib inventory was 62.7 million pounds, showing a 42% decrease compared to the previous year.

Pork trim inventory also experienced a decline of 12% compared to the previous month, which is higher than the average 5% drawdown observed in the last five years. The lower inventories, combined with the seasonal decline in supply during July, resulted in significantly higher pork trim prices recently.

Unlike beef, the USDA does not provide a regional breakdown of inventory numbers. However, export outstanding sales have increased by double digits from a year ago, indicating that more pork is staged for export than last year. This implies that the available pork inventory for domestic use may be even lower than the overall numbers suggest.

Price Chart