Uncharted Waters: High Uncertainty in the Pork Industry

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By Kent Bang, Director – Swine Lending, Compeer Financial

The current turmoil we’re facing in the meat markets is unprecedented. As the U.S. deals with the spread of COVID-19 and attempts to “flatten the curve” on the rate of infection, the disruption to normal supply chains and businesses is hard to predict, let alone manage. As most states now have bans on restaurant dining and other travel and entertainment, understanding meat demand is impossible to gauge. It is like sailing a vessel in uncharted water — we have never done this before.

We know we have a high inventory of hogs. We know the industry has expanded during the past five years following the PEDv issues in 2014. USDA’s Hogs and Pigs Report indicates the Dec. 1 breeding herd increased by 2.3% from the prior year and market inventory of pigs was up by 5%. USDA’s cattle report shows the beef and dairy herd was down by 0.5% and inventory for calves more than 500 lb. was down 0.5% while calves less than 500 lb. was up 1.4%. According to USDA’s poultry report, egg sets in 2020 are 103% to 105% of the previous year and broiler chicks placed are similar in numbers at 103% to 105%.

Disruptions
Large-scale restaurant and food service closings brought on a major disruption to the market.  As closings spread across the country, we saw a major change in product demand. There has been an increase in demand for pork loin and tenderloin, driving the wholesale loin primal price to the highest level in more than four years. This has replaced some demand for bacon, driving belly wholesale prices to the lowest level in over four years.

We have watched demand grow through the roof. It has been driven by changes in the supply chain, retail purchases traded for food service on a large scale and consumers stocking up on meat supplies. Short-term prices rose on demand, and the livestock industry had the inventory to sell. Another factor driving higher harvest numbers was a fear of plants closing due to COVID-19’s impact on the workforce. At press time, the only major impact to a plant I am aware of is the Olymel plant in Quebec that closed for two weeks after experiencing a number of positive cases in their workforce. The fear of disruption has contributed to the most recent week’s harvest numbers estimating beef slaughter up 9.3%, pork slaughter up 9%, chicken slaughter up 5.1%, and turkey slaughter up 5.8%. The desire to get ahead of processing needs has clearly put a lot of meat into the chain and will impact prices in the short-term. 

As we work through the supply chain issues and try to find level demand, I’m reminded our population still needs three meals a day and the demand for pork on a global basis is huge. All these issues will mean continued uncertainty going forward in the next few weeks and maybe months. 

With all the challenges facing our industry, first focus on the most important issues. Take care of your family. Take care of your employees and their families. Do what you can to be as safe as possible, given the importance of taking care of your animals and your business. 
 

More from Farm Journal's PORK:

 

How are Ports Minimizing Disruptions in Pork Chain?

USDA Releases Hogs and Pig Report, Demand is the Big Question

COVID-19 Spurs Spike In Meat & Poultry Production

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