Pork Prices Seasonally Lower And With More Downside From Here

Hog slaughter was lower than the previous week but for the next 6-7 weeks slaughter should hover around 2.6 million head, helping bolster supply and pressure prices lower. Futures were lower earlier in the week, largely a knee-jerk reaction to the results of the September inventory survey. In the near term, however, wholesale pork prices have been more resilient than markets were expecting.

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Wholesale Pork Prices Move Lower As Seasonal Supply Increases And Softer Demand Catch Up With The Pork Market.

While we can spend a lot of time about specific factors driving prices for primals and subprimals, the chart below drives home one simple point: pork prices as a whole generally are higher in the summer and lower in the fall. Grilling demand picks up after Memorial Day and runs out of steam by Labor Day. During this time, slaughter declines and carcass weights drop, resulting in significantly less pork coming to market compared to both spring and fall levels. This year the Supreme Court decision injected a lot of volatility and affected the way in which packers, processors and traders handled their frozen inventory position. Ultimately, however, those seasonal factors are playing out and they will continue to play out in the next three months.

Loin Market Situation

With less grilling demand and the seasonal increase in hog supplies, loin values generally move lower into the fall. It appeared that loin prices might come under increasing pressure in August as slaughter climbed over 2.4 million head but just as a year ago prices have proved to be resilient so far. Eventually, however, the higher slaughter numbers and heavier weights start to have an effect. It becomes increasingly difficult to clean up the spot market in Nov/Dec as holiday items fill the meat case. Last year the loin primal value dropped from around $100/cwt in early September to around $80/cwt by mid-December. So far, the loin primal value is following the same track as a year ago although futures imply a less robust market at the end of the year. It could be that futures are pricing more demand risk, especially with stricter enforcement of Prop 12 starting January 1. With the loin primal accounting for about a quarter of the hog carcass, price trends for this item will be closely watched. Spot market for pork loins has been well supported and export demand remains in good shape. But lower prices for ground beef and chicken breasts imply more competition in the meat case and thus more downside risk.

Belly Market Situation

Prices have pulled back from the highs established in July and August but that should not come as a surprise. Low prices in the spring and the sudden shift in inventory use (due to CA situation) resulted in a sharp spike, similar to what we have seen in other years. Prices are now in line with a year ago and ample supply in the fall should help keep prices in check. Of concern for the belly market are reports of a slowdown in foodservice demand. Lower prices for chicken breasts lend some credence to such reports and some surveys now also support the view unit sales at foodservice are trending down. In part this reflects the fact that foodservice prices continue to outpace overall inflation. Belly demand is closely linked with foodservice as a whole and especially fast food sales. As was the cast last year, the price risk for this item is to the downside.

Ham Market Situation

The ham primal is down from a year ago and ample turkey supply and lower prices will temper domestic demand going into the holidays. For now, however, robust export demand continues to underpin ham values. This may prevent a price drop like we experienced in 2021 but the price risk for hams skews to the downside, especially by late November when export demand slows down and processors start to wrap up their buys for Christmas orders.

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