Disruptions in the Pork Supply Chain

The USDA cut the 2020 Pork production estimate this month the result of plant closures as finished hog supplies remain plentiful.

Hog processing appears to have turned the corner suggesting USDA’s production cut for 2020 could prove overly pessimistic.

The USDA has forecast a trend increase in pork production in 2021. Farmers might restrict breeding stock as this spring’s disruption in the marketing of finished animals  has been costly to all segments of the pork industry and adds an element of risk not dealt with in the modern era.

Pork export sales were brisk this winter and spring. USDA expects pork exports to trail off this summer as a strong dollar makes US pork more expensive.

 The scatter study displays deliverable hog prices as a function of the domestic pork supply per person. Data covers the last half of the year. Note that futures contracts are trading on the low side of the scatter although within the standard error of the data.
 

Deliverable hog prices could  struggle until the backlog of finished hogs is reduced. Hog values could turn more bullish in 2021 if farmers reduce hog numbers in response to this year’s disruptions. But cheap corn will help producer margins and will likely soften the impact of plant closures.