Pork Packers Face Worst Margins Since 2014 on U.S. Hog Shortage

A shortage of hogs in the U.S. means pork-packer margins are getting pinched.

Losses deepened to $60.23 per hog, according to HedgersEdge data Tuesday. That’s the most in records going back to 2014.

Packers trying to meet demand as restaurants reopened have been getting squeezed, paying a premium for hogs after farmers culled the herd during the pandemic. Even as restocking has slowed and pork prices have declined, hog supplies are expected to remain tight because of the diminished herd.

“They had to have the hogs,” Allendale Inc. chief strategist Rich Nelson said of the packers. “We did have the margin squeezed aggressively with the intense need for hogs.”

Pork Packers Face Worst Margins Since 2014 on U.S. Hog Shortage

The U.S. Department of Agriculture in a quarterly report due Thursday is expected to show the American hog herd down 2.3% from a year ago at about 75.6 million head, according to a Bloomberg survey of analysts.

Nelson said hog supplies will hit their annual low in July. Many pork packers also own hogs, which helps reduce exposure from having to buy on the open market.

The weak margins in pork are counter to what’s happening elsewhere in meat markets. Beef-packing margins have declined as well but at $648.05 per cattle remain at historically high levels, according to HedgersEdge data. Meanwhile, poultry-producer prices hit an all-time high in May.

©2021 Bloomberg L.P.

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