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The first quarter of this year saw a surge in many commodity prices, on the back of growing market expectation of a post-Covid recovery in the global economy. But in the lean hogs market, other factors were in play as well.

Lean hogs futures had gained 45% in part because of the devastation of China’s hog herds caused by African swine fever (ASF), which had first hit Chinese herds in August 2018 and which has continued to plague China’s pig production ever since.

African swine fever drove prices in first half

China, which is both the biggest producer and consumer of pork, tackled the ASF crisis with drastic measures and culled something like 200 million pigs, or about one third of China’s pig population, with obvious consequences for the global pork market. At the end of 2020 came news of yet another outbreak of ASF, despite the mass culling, when farmers rushed to sell their stock. From January 2021 to the end of June 2021 live hog prices fell by almost 65%, due to increased slaughter, falling demand and a glut of pork on the market.


Meanwhile, in the US, demand for pork jumped, in particular from China. In May, lean hogs for July delivery on the Chicago Mercantile Exchange reached $1.1250 per lb, the highest in almost seven years. Over the year, prices had surged 127%, with most of the gains in the second quarter of this year.

But as veteran observer of the market Jim Wyckoff noted, history shows meteoric price gains do not last for long. By mid-June, live hog and pork prices had dived on reports that China’s sow herd had been rebuilt to 98% of its pre-African swine fever levels, raising fears of a major slowdown in Chinese pork purchases.

Chinese demand for lean hogs still holding up

However, the US Department of Agriculture (USDA) reported that, even if the ASF outbreak were finally brought under control, swine numbers in China wouldn’t recover at least until mid-2021, while the rebuild of the herds is being delayed by high piglet prices, high feed prices and fears of new ASF strains or further outbreaks.

At the beginning of July, Chinese demand for US pork from China was still strong, with US pork export sales to China at their highest since March. At the CME, lean hogs prices gained on news of a shortage of market-ready hogs, as producers struggled to rebuild their herds, and on a cut in USDA estimates of domestic pork production this year and the next.

Continued price declines in live hog and pork prices will create potential gaps in pork production in the second half of 2021, according to Wyckoff.

The Chinese government, as part of a strategy to stabilise pig production, is helping pig farmers in two ways: introducing an insurance scheme over the next three years to reduce severe price fluctuations in live hogs and pork prices, and launching a livestock health programme to tackle the continuing problem of SFA outbreaks. Meanwhile, demand for US pork is expected to remain strong, with the US pork production in 2022 expected to be down 1.5% on USDA’s June forecast.

Lean Hogs ETFs

Product NameISINExchange TickerListing Currency
WisdomTree Lean Hogs
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | Charles Stanley Direct | EQi
GB00B15KXZ70HOGSUSD

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

James Norris

James Norris

James is a highly experienced writer and editor, gained from more than 20 years in the financial services industry, in particular wealth management and asset management.

He initially worked as a financial journalist for a number of leading media brands, including the FT Group, Financial News, Euromoney and Incisive Media, covering most aspects of the asset management industry. More recently, James switched to work as an in-house content specialist for fund management and wealth management groups, including JP Morgan Asset Management, Quilter Cheviot Investment Management, AXA Investment Managers and Invesco Perpetual.

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