The hog market has definitely “sold the trade” over the past couple of months, said Will Sawyer, CoBank lead economist for animal protein, on AgriTalk Tuesday. After weeks of China, NAFTA, Mexico and other trade headlines, “it’s actually good to see the market doing a little better today.”
Better, but there is still a long way to go in the third quarter, he said.
“There’s not a lot of money to be made in the hogs, with the lean hog contract under $50,” Flory added.
Sawyer agreed, adding “I think producers are definitely going to see a challenging next few months as well.”
Eyes on Mexico
As threats of trade retaliation and promises of relief aid fill the headlines, which of U.S. pork’s top markets will budge first?
“As the trade numbers start to move over the next couple of months, and obviously, that's data that we get at least a month or two after we see the actual trade happen, I think the market will feel a little bit better about how this Mexico story is shaping. That is really what dominates pork trade in the U.S.”
The U.S. pork trade to Mexico is really “a tale of two ends of the animal,” Sawyer said. Ham is the driver—40% of all U.S. hams are finding a way to the Mexican market.
China market, on the other hand, is largely made up of offal cuts that don’t have a good home in the U.S. “When we think about where that product ends up, that Chinese consumer is willing to pay a significantly higher price than what the rendering market in the U.S. would look like,” Sawyer said.
“Mexico still dominates U.S. pork exports, it's about a third of the export story,” he said. “We really need to keep that market intact as we go through the rest of especially in 2019.”
Click above to hear Sawyer’s extended comments about the U.S. pork supply and current packing capacity.