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What do we know about hog markets in a world of unknowns?

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Take care of yourselves, your family and your people. Do everything necessary to make every pig you feed a profitable one.

It is difficult to know where to begin or what issues to address today. COVID-19 has wrought so many disruptions to normal life already that we're not sure what the impact will be. And those are the disruptions already known. There are still the vast unknown impacts of the future. What do we know — or think we know?

  1. Nothing has changed in the world's pig supply. Whatever the supply of pigs in the world — and for the most part in individual countries — was going to be as of late-January when COVID-19 exploded in China, that's the supply of pigs we see now. And that supply is much tighter than it was just a couple of years ago. Under normal demand circumstances there still are not enough pigs in the world.
  2. Feed costs are still low and will likely stay that way. I have seen nothing that would cause me to worry about U.S. feed supplies in either the short or long run. There could be some locational disruptions if transportation systems become burdened but on the whole, this side of our business still looks solid.
  3. I believe that U.S. pig producers are current in their marketing activities, but I'll be the first to say that I don't know that. Hog numbers have run ahead of USDA and Kerns projections, and weights have come down since the first of the year. That combination usually implies "current" but the prohibitions on ractopamine for hogs delivered to JBS and Tyson (about 35% of total capacity) have confounded the data. Is that weight reduction the result of dipping deeper into finishing buildings or the result of slower weight gains? I still think the size of weekly slaughter runs suggests we are current. I wouldn't, however, climb very far out on that limb.
  4. Retail outlets are screaming for product of about every kind to fill shelves cleaned out by nervous consumers last week. This is true for all meats, pork included. We have heard of sharply higher bids already this morning, and I suspect we will see higher product prices in the short run at least.
  5. Foodservice establishments will take a hit, but the hit may not be nearly as large as in the past due to food delivery services. It appears to me, though, that this will help beef and chicken more than pork because a) beef and chicken have always taken the brunt of foodservice slowdowns since they have more exposure on foodservice menus and b) I don't believe there is as much carryout breakfast business.
  6. Employees of many companies can work remotely, but farms and packing plants require living, breathing, skilled people to be in place. With schools closing, many production and packing companies are, to their great credit, scrambling to provide childcare to employees to enable them to work. Virtually all of the packers to whom we have spoken say they will not idle a plant to pre-empt COVID-19 but, rather, will operate as long as they have enough healthy workers to remain open. The same appears to be true of USDA inspectors who must be in place for a plant to operate. USDA has said they will not withdraw them from plants where COVID-19 may have occurred. That's reassuring but there aren't a lot of these inspectors, so we hope all of them stay healthy.
  7. Demand will take a hit of some magnitude but for pork it may be small. My big concern is the number of workers who are going to see less income. Employees of stadiums, transportation, hospitality industry, etc., are all seeing lower work hours and lower incomes. For some, not traveling means not working and lower or no income. The flip side: I have never been able to find an income variable that is a significant predictor of domestic pork and hog demand. Meat demand studies have always found that the income elasticity of pork demand is small, but I can't even find something that is statistically significant. That's bad if you are trying to sell pricey products but great if your buyers' incomes take a hit.
  8. Pig supplies will decline as summer approaches. Death and taxes are not much more dependable than that statement. Those supplies may stay larger than we expected (we'll learn more on that when March's Hogs and Pigs report is published on March 26), but they will be smaller than at present. That will be supportive to cash hogs unless the hit to demand is much larger and longer lasting than I expect.
  9. I'm still very concerned about this fall. Breeding herd growth plus productivity plus good herd health plus seasonal growth all spell large numbers this fall. All of our new packing capacity will be filled. COVID-19 has not changed any of those facts either.

I am so sorry for families who have lost loved ones, people who are facing severe hardships and many of you who are seeing your livelihoods damaged by this disease. There's not much you can do about hog prices at this point. Take care of yourselves, your family and your people. Do everything necessary to make every pig you feed a profitable one. Everyone wants to maximize profits. There are times when minimizing losses is the best you can do. It sucks. But my God and my parents and my wife and my kids and my friends still love me. And so do yours.

Source: Steve Meyer, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. The opinions of this writer are not necessarily those of Farm Progress/Informa.
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