REPORT

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PORK

Weekly hog slaughter last week reported a kill of 2.327 MM hogs, up almost 7% over

a year ago. This week’s slaughter is forecast higher at 2.36 MM hogs, up counterseasonally,

signifying an underlying tone of strong wholesale pork demand. As we

move toward March, slaughter levels should gradually decrease as packers react to

weaker demand.

On the hog front, interior cash hog prices continue to increase, as packers are paying

higher money to accommodate seasonally strong wholesale pork demand from a

tighter supply of hogs. Due to the strength of the rising interior markets, the futures

market is also increasing on the basis of a continued positive hog outlook.

On the meat side, the pork cutout continues to increase due to increases in product

values. The increasing cutout would normally drive up packer margins, but any gains

are being eroded by the rising cost of hogs.

Last week, the final export numbers for 2016 were released, indicating an extremely

strong year for U.S. pork exports at 5.23 billion pounds, just shy of the 5.37 billion

pound record. Total U.S. exports were 25% of domestic production, with Mexico being

the largest importer of U.S. pork.

LOINS

After trading down for three consecutive weeks, Bone-in Loins became enough of a

value to find support and bottom out last week, resulting in a flat trade for the week.

The forecast for Bone-in Loin pricing is to slowly increase through the end of March,

as spring retail demand kicks in. Boneless Loins have been on a nearly identical path

to their Bone-in counterparts. Boneless fell slightly last week, but are forecast to

slowly move higher for the next six weeks as retail spring demand is expected to kick

in on the entire Loin complex.

TENDERS

Pork Tenderloins prices were up slightly last week due to stronger demand. Demand

is expected to be strong for the balance of the month due consumers’ trading up to

more expensive Pork cuts due to tax returns and also Valentine’s Day. Once March

rolls around, typically tenderloin prices will slowly decrease until April when summer

demand kicks back in.

BUTTS

Pork Butts started their seasonal move upward last week, trading up moderately, with supply

very tight for the next few weeks as export bookings for March are being allocated. In addition,

Pork Butts are being featured at retail in March, and cold storage continues to pressure the

fresh market as freezer stocks are replenished. Consider Pork Butts to trade higher each

consecutive week through May.

RIBS

Rib prices continue to trade higher, with Back Ribs moving up steadily and Spareribs

increasing marginally. Packers are officially in high gear for Rib production, allocating a

majority of their fresh Rib capacity to large retail frozen Rib packages for summer months.

Thus, fresh availability is squeezed and buyers will need to pay higher money for their needs.

In addition, smaller sized Ribs including both Back Ribs and St. Louis Ribs, are extremely

tight in the primary market.

BACON/BELLIES

While Belly prices continued to move higher last week, trading up $0.09/lb, all signs are

pointing that this market should peak any day now. Load counts have decreased and

prices have toggled within a narrow range for the last seven days, which further suggest

a slowdown in Belly demand. Analysts are hinting that wholesale prices got too high for

retail, and so they are backing off on demand, both on feature activity and price increases,

which should help drive the market lower. The big question is: How fast will the market fall?

Analysts are forecasting a gradual decline instead of a free fall as basis demand is still very

strong from other channels, including foodservice and cold storage.

HAMS

Ham prices increased slightly last week. For the next 30-days, expect Hams to slightly

increase due to modest support for Easter Ham bookings as well as steady demand

from export and cold storage buyers.

TRIM

Pork Trimmings were active last week, with 42% Trimming trading up due to their

seasonal increase in demand from Hot Dog and Sausage makers. Now is the time

when processors start buying Trim for their freezers in anticipation of ramped up

summer production. Lean 72% Trimming continued their move down last week,

trading down in what could be their bottom. Just like the 42s, expect lean Trimming to

kick into gear any day now as processors ramp up for summer.

PICNICS

Boneless Picnic prices traded flat last week, but will soon begin their seasonal move upward

as Sausage makers ramp up for summer production. In addition, the Boneless Picnic will see

increased demand over the next 30 days as some processors utilize Picnics for Easter Hams,

which are sold into the retail market.

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