Lean Hogs Prices Explained
Lean hog prices take their 5-week high as some countries restrict their hog exports from Hong Kong due to the outbreaks of African swine fever, Classical swine fever, and swine vesicular disease in the region.
Thus, this resulted in a lower commodity inventory as health protocols tightened international trading from the affected area which contributed its increasing prices.
Why are lean hog prices fluctuating?
Generally, lean hogs’ volatility in the market relies heavily on the unpredictable shifting of demand and supply. However, there is more to know about the boom and bust in the meat market.
1. Supply and Demand
The contrasting supply and demand in the market is one crucial factor in lean hogs’ value. Just like any top commodity, when the demand and supply increase, its price surges. Conversely, when the supply is high but the demand falls neutral, prices will gradually fall thus, affecting the economy.
2. Production Costs
Farmers are one of the deciding factors in swine’s fluctuating costs. The cost of feed, labor, transportation, and other expenses will affect farmers’ production budgets. Therefore, any increase or decrease in these inputs will affect the lean hogs’ market prices.
3. Weather Conditions
Drought, floods, or storms affect the price of swine. Thus, delayed production due to natural disasters causes an imbalance supply chain which will tighten the market and drive lean hog prices up.
4. Trade Policies
The frequent emergence of African swine fever makes international and local trade policies even more strained which squeezes the local swine farmers to cover the growing need. Overall, this inevitable meat disease adds fuel to the volatility of the lean hogs market.
5. Market Predictions
Speculators’ role in the market is one element in pork’s cost. Generally, most of them make a profit by forecasting prices according to their favor bringing considerable fluidity to the market.
Which variables impact the price of lean hogs?
- Supply and Demand
- Production Costs
- Weather Conditions
- Trade Policies
- Market Predictions
- Consumer Preferences
Where do lean hogs come from?
The Chicago Mercantile Exchange first introduced lean hogs as an exclusive agricultural trading commodity in 1966.
The term “lean” refers to its harvested meat quality which has lower fat compared to other pork. Thus, earning its name “lean hogs”.
Therefore, lean hog production is quite strict as it needs to follow grading quality since customers tend to look for meat with reduced fat as a healthier option.
Additionally, its grading quality process involves 3 factors:
1. Carcass Weight
The total weight of the carcass after dressing and processing. The average range is 190 pounds.
2. Loin Muscle Area
The key indicator of the amount of lean meat present in the loin area. The average required thickness is 6.5 square inches.
3. Backfat Thickness
This indicates the total amount of lean meat present in the carcass. The needed range is from 0.4 to 2.0 inches.
Presently, China tops for the largest lean hogs country producers accounting for 40 million metric tons of meat production in 2021. This accounts for 50% of global production. The United States, Brazil, Germany, and Spain follow distantly.
What is the future price of lean hogs?
There’s a steady lean hog production globally throughout the year. However, some specific seasons highlight its outstanding demand and market price.
For example, consumers can enjoy its’ consistent supply along with its’ seasonal price increase, particularly during summer as people like to go on picnics, swimming, or any outdoor activities that involve cooking and grilling.
Additionally, holidays such as Christmas Day and New Year’s Day provide traffic for lean hogs supply and price variation.
Furthermore, the spread of lean hog farms specifically the growing swine market in China is an additional price downgrader for the already decreasing hog prices.
Overall, experts projected a conservative price estimate of around $1.40 per pound as consumers’ disposable spending largely relies on the degree of inflation.