Mar 30, 2021 - Economy

2021's top asset: Lean hogs

Data: FactSet; Chart: Axios Visuals

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.

Go deeper