Profit Potential and Packer Problems Impact Pork Market
Pork Market Rise 051821
By Jennifer Shike and AgDay TV
Skyrocketing pork prices, a shortage of packing plant workers and flat domestic consumption are all contributing to a multitude of dynamics in the pork market now. John Payne, author of Swine Times, shared his view on the market with AgDay TV’s host Clinton Griffiths.
“Pork prices are skyrocketing. We're at the highs last year when we had essentially halted production amidst the pandemic,” Payne said.
The pork cutout, in addition to beef and poultry prices, have all rallied, he added.
“The end product that's being consumed, we never stopped consuming. So now we're at the tail end of the cycle, at least in the hog and the chicken side, where they've got to increase production here rather quickly to try to catch up to the demand that is that has pushed these prices higher,” Payne said.
Although there’s a lot of profit margin, packers are facing a problem. They can’t get workers, Payne said.
“I saw a note today from Tyson that maybe 50 percent of workers aren't available right now, either by choice or simply have found other opportunities. I've heard that on the beef side as well,” Payne said. “It's a dynamic that's just nuts.”
In the short run, he said one would expect lean hog prices to rally. But if you're not buying the pigs to create the pork, then the lean hog animal price will suffer and that spread will widen between the pork price and the animal.
“I don't think that's going to happen. I think eventually they will get this worked out,” he said. “They have to. I think price will dictate.”
In the case of consumption, it's going nowhere, even at these prices, he added. Reopenings are taking place in all of the big major markets that need food immediately to service the demand.
“Short-term, we tend to not make highs in May. You look at a big fat price gap up there at 119 on the June, maybe we get there in July. Deferred contracts until December, September, even maybe February 2022 are up there for a reason. You might want to take a shot and do some hedging here,” Payne said.
As far as the export demand goes, he said it’s a guess if it will go or stay. If China doesn’t import like they have been, he expects lower prices. If China does import like they have been and the U.S. pork industry is still not producing as much, he expects the industry will see much higher prices into the second quarter.
More from Farm Journal's PORK:
6 Issues Driving Global Hog Prices
3 Experts Share Tips to Lower Feed Costs and Improve Profitability
