Porto Alegre, July 2, 2021 – According to the USDA’s report released last Thursday (24), the US swine herd was at 75.653 mln head up to June 1, which represents a decline of 2.21% compared to 77.364 mln head on June 1, 2020. Against the 74.913 mln head estimated up to March 1, 2021, there was an increase of 0.99%.
Out of the total number of animals indicated, 69.423 mln were destined for commercialization, while 6.230 mln animals were kept for reproduction. As for those destined for reproduction, there was a decrease of 1.52% compared to June 2020 (6.326 mln head) and an increase of 0.24% compared to March 2021 (6.215 mln head).
Like in Brazil, the concern of the US market is around the possible slowdown in Chinese purchases. An increase in supply and a decline in demand will inevitably lead to a decrease in prices. The prices of US swine have advanced strongly since the beginning of the year, with an adjustment in supply and resumption of economic activity, with sumptuous financial incentives, via cheques to families, to combat the impacts left by Covid-19. Along with this, vaccination advances quickly in the country, which stimulates social liberation and consumption. Between December 2020 and March 2021, the swine herd shrank, which helped the recovery of prices, both for live hogs and carcasses.
Since March, the US herd has advanced, which, added to the news about the recovery of the Chinese supply chain, has caused concern. The question is whether domestic demand will be able to absorb additional supply if exports sharply decline. China is now the largest importer of American pork, followed by Mexico. Besides, there is concern about the blocking of one of the main US plants by Mexico, involving the quality of pork skin, which is much demanded by Mexicans.
The CME lean hog futures contract, shown below, shows a strong price retreat in recent days, following the strong volatility of the Dalian live hog futures. The August contract for lean hogs in the US hit 120.55 cents per pound on June 7 and since then has dropped around 17%, compared to 100.00 cents per pound registered on last Friday’s intraday trading.