Description

Hogs are generally bred twice a year in a continuous cycle designed to provide a steady flow of production. The gestation period for hogs is 3-1/2 months, and the average litter size is nine pigs. The pigs are weaned at 3-4 weeks of age. The pigs are then fed to maximize weight gain. The feed consists primarily of grains such as corn, barley, milo, oats, and wheat. Protein is added from oilseed meals. Hogs typically gain 3.1 pounds per pound of feed. The time from birth to slaughter is typically six months. Hogs are ready for slaughter at about 254 pounds, producing a dressed carcass weight of around 190 pounds and an average 88.6 pounds of lean meat. The lean meat consists of 21% ham, 20% loin, 14% belly, 3% spareribs, 7% Boston butt roast and blade steaks, and 10% picnic, with the remaining 25% going into jowl, lean trim, fat, miscellaneous cuts, and trimmings. Futures on lean hogs are traded at the CME Group. The futures contract is settled in cash based on the CME Lean Hog Index price, meaning that no physical delivery of hogs occurs. The CME Lean Hog Index is based on the 2-day average net price of slaughtered hogs at the average lean percentage level.

Prices - CME lean hog futures prices (Barchart.com electronic symbol HE) posted their low for 2021 in January of 66.125 cents per pound. Hog prices then trended higher into Q2. Relentless pork demand from China was bullish for hog prices following a resurgence of the African swine fever in China, the world's biggest pork consumer. In March 2021, China's pork imports jumped +16% yr/yr to a record 460,000 metric tons. Chinese hog herds in Q1 contracted by 30%, and China's hog inventories were only 60-70% of normal due to the culling of herds from the African swine fever outbreak. Hog prices spiked to a 7-1/2 year high in June of 123.075 cents per pound on supply fears after a cyberattack on JBS SA, the largest meat producer globally, shut down many of the company's meat processing plants. U.S. hog supplies continued to shrink as the Q3 USDA Hogs & Pigs Inventory report showed the U.S. hog herd on September 1 fell -3.9% yr/yr to 73.5 million hogs, a bigger decline than expectations of -1.7% yr/yr and the biggest decline since 1999. Also, the U.S. hog breeding herd dropped -2.3% yr/yr, more than the consensus of -1.1% yr/yr. Hog prices then tumbled into November as China ramped up its hog production. The China hog herd on September 30 rose to 411.9 million head, the most since 2015. Hog futures prices firmed into year-end after Germany's hog herd in November shrank to a 25-year low of 23.6 million head as hog farmers culled herds to battle an outbreak of African swine fever. Hog prices ended 2021 up +15.9% yr/yr at 81.475 cents per pound.

Supply - The number of hogs on world farms as of January 1, 2022, fell by -0.2% yr/yr to 748.606 million head. The number of hogs in the U.S. as of January 1, 2022, fell by -4.0% yr/yr to 74.201 million head. The countries with the largest number of hogs as of January 1, 2022, were China with 54.8% of the world's hogs, the European Union with 19.5%, the U.S. with 9.9%, and Brazil with 4.9%.

Demand - The federally-inspected hog slaughter in the U.S. in 2021 fell by -8.8% yr/yr to 119.288 million head.

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