US hog industry struggles
Hog prices in the red puts major financial stress on much of pork sector
9 May 2023
4 minute read
By: The US industry continues to struggle. Hog prices below cost of production is putting a major financial stress on much of the Pork sector. There will be significantly fewer pigs year over year by the end of 2023 and even fewer in 2024.
Our Observations
- Major sow liquidation is underway which will decrease the U.S. sow herd by 4% – 200,000 – 250,000 sows in our opinion. A reflection of the economic conditions but also the ongoing health issue problems that over and over lead to decreased production and spikes in cost of production.
- There is a challenge to get sows marketed currently a combination of large numbers and pork market conditions with sow mortality industrywide of 14 -15% slowed gilt placement due to market in itself will cut the sow herd.
- We have seen many hog price debacles in the time we have been in business. The scenario today seems somewhat different. Why?
- In other price collapses we dealt usually with spiked hog production. Year to date the U.S. has produced 1% more Pork than a year ago. With Beef production down 4.9% year to date total Red Meat production is down 2.0%. Certainly not significantly more Pork and a lot less Beef.
- Year to date U.S. Pork exports is up 7% with exports appearing to clearly be climbing. Latest weekly U.S. Pork export sales 49,000 MT, the week before 54,000 MT. Clearly higher than the 31,000 MT average year to date. Greater amounts of Pork exported obviously shorts domestic market and will be supportive for price.
- Spain, a major U.S. pork competitor exported 7.4% less Pork year over year in the first quarter. Spain hog price is almost double the U.S. price. Not only has Spain got higher prices but also less Pork to supply (that’s why the hog price is higher). We expect continued increased export sales from the U.S. as arbitrage takes hold.
- China seems to be importing more Pork. Year to date U.S. to China exports are up 27%. China has announced they are going to purchase for Government Pork Reserves. Pushing up demand. We expect China’s hog price will take off sometime in June-July as supply tightens from liquidation that has happened due to losing economics and African Swine Fever – PED – PRRS. When that happens there will be even greater amounts of Pork imported. China is the largest importer of Pork globally.
- Weights seem to be declining Iowa – S. Minnesota 2.6 lbs. lower than a year ago. We wonder why Saturday slaughter numbers were 136,000 last week. Seems to us that could indicate some sort of good demand that Packers are seeing. We are entering Spring – Summer when hog slaughter declines seasonally significantly.
- Friday Beef cut-outs $309.19 lb. Pork cut-outs 81.87¢ lb. A huge difference. You would think that this price spread will narrow. We don’t expect Beef to decline as Beef supply stays low. Pork should go up.
- The price spread between Beef and Pork as we all know is mainly due to the consumers preference for the taste of Beef. As we have written about regularly until we improve taste of Pork we will be challenged to compete with Beef.
Summary
There are some factors that in our opinion could really trigger a rapid hog price increase.
- Increasing Pork export sales – Europe record hog prices – Arbitrage.
- Seasonally hog numbers declining – cutting supply.
- The price spread between Beef and Pork leading to featuring of Pork in domestic retail increasing demand.
Long term price
Ongoing sow herd liquidation will cut Pork supply in late 2023 into 2024.
We expect China supply cut will increase their pork imports from mid 2023 to 2024.
Coronation King Charles III
Last Saturday Charles III was crowned King. We understand there was a lunch at Buckingham Palace and a formal dinner at Windsor Castle.
Maybe you remember our report from a few months ago where British producer Jimmy Butler’s Blythburgh Free Range Pork was supplying Genesus Jersey Red Duroc bred to Genesus Females premium Pork to both Buckingham Palace and Windsor Castle. We don’t know if Genesus Pork was served at the Coronation events.
It appears Genesus Pork “Is fit for a King.” It’s our position that the excellent-tasting attributes of Genesus should also be available to each and every consumer. Taste drives demand.
