Hog markets crash similarly — but so differently — than 1998

It doesn’t matter if you’re looking at cash prices, lean hog futures, weaners, or fat hogs — hog prices were down, down, down, across the board by the end of the first week of April.

The crash echoed in the cattle markets, comes as the full impact of the COVID-19 pandemic hits North America and Europe. It also follows a tumultuous week in the hog processing sector, as Olymel closed a processing in Quebec, and petitioned to cancel its contracts by enforcing the force majeure clause

For anyone in the hog and agriculture industry, this slide echoes the crash of 1998, though the reasons for it and the industry itself is much different than then.

Hog prices, 1998

Tyler Fulton, director of risk management for Hams Marketing Group, says that the chart for prices during the 1998 crash in Canada does look similar to this current crisis. But the factors at play then are so very different from now. The outcomes, too, may be very different, though it is too soon to say. For example, Fulton says, the Manitoba industry consolidated from around 1,500 hog producers to 300 in a few short years.

This time around, the industry is already vertically integrated, efficient, and fine-tuned for just-in-time delivery both domestically and for export markets. But those markets have essentially been completely turned upside down through major disruptions in retail buying patterns and a lack of movement of global trade. And that’s before we even discuss the processing challenging of closed plants, Fulton says.

That said, there are global factors that support a recovery at some point — but in the meantime, the Canadian hog industry is rapidly approaching the “worst-case scenario” if we’re not already there.

Listen on for the full interview with Tyler Fulton:

Related: Olymel wants out of hog contracts, citing force majeure

Check out this Twitter thread where farmers are sharing their past experience with the hog industry price swings:

 

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