Hog Market Chopped

Pork prices are dropping, with many futures contracts reaching toward new low levels, a sign of renewed pessimism in the near term. U.S. pork production is at a record level, which is overwhelming the market with meat.

Traders had expected that the ongoing African swine fever outbreak in China would force the world’s largest pig producer and consumer to start buying U.S. pork, but that demand has not appeared yet.

Ongoing trade disputes are still discouraging full-scale Chinese buying, and any further spread of the disease could cause import demand to fall further. Chinese farmers may be forced to cull their hog herds, which would create a short-term glut of meat. Longer-term, China could find itself with a pork shortage, boosting demand, but that may not appear until next summer.

As a result, U.S. pork futures are dropping now, but prices for next summer are much higher. For example, February hogs are worth 55 cents per pound, but contracts for June 2020 are worth nearly 80 cents per pound.