Thanks to declining production and bullish expectations for greater demand and more grocery shopping, prices of lean hogs are through the roof in 2021 and have become the world's top-performing major asset.
What's happening: Prices have risen by more than 60% over the past year, with the overwhelming majority of that growth taking place in 2021 (up 50% year to date), as the commodity has broken out since January.
- Prices rose to their highest since Sept. 2014 last week and there's still room to run, experts say.
How it works: USDA recently revised its forecast of U.S. per capita pork consumption to 52.5 pounds per person for this year, the highest it has been since 1981.
- Concurrently, USDA’s latest hogs and pigs report shows inventory down about 3% from last quarter and 1.8% from last March. That's the first March-over-March reduction since 2014, according to Jason Franken, agricultural economist at Western Illinois University.
- “With continued strong grocery store demand and further prospects for restaurant re-openings as more U.S. citizens are vaccinated against COVID-19, the market looks promising,” Franken tells the Farm Journal.
Don't sleep: There also appears to be plenty of room in cold storage, Franken says. According to the latest USDA cold storage report, cold stocks of pork are up 7% from the previous month but down 24% from a year ago.
- That's well above the change for poultry — stocks are down 3% from the prior month and 14% from a year ago — and beef — down 2% from the prior month, but up 3% from last year.
The big picture: The supply/demand mismatch along with consistently lower slaughter rates are pushing expectations higher and putting a floor under prices.