18 July 2023

3 minute read

By: Jim Long

South America

North America

Last week the USDA released their estimate for the 2023 corn crop. USDA projection is 15.320 billion bushels, the largest ever. If estimate is correct, it would be 172 million bushels higher than the former record crop in 2016. In 2016-17 crop year the average bushel of corn in USA was $3.65 a bushel. Crop isn’t done yet and weather could very easily change the final crop outcome, but the potential continues for lots of corn pushing prices down from the lofty heights of the past two years.

At the same time USDA estimates Brazil’s ongoing corn harvest will be its highest ever. Last Friday corn in Brazil U.S. dollars/bushel, Dourado $3.74, Rondonopolis $3.65, Rio Verde $4.00. These types of prices will be attracting import buyers and put continual pressure on U.S. prices.

Heaven only knows where this volatile market can go but it appears is the scenario for hog producers getting price relief from the high corn prices of the last two years.

U.S. Pork Cut-outs

Last Friday U.S. pork cut-outs closed at $1.15 lb. Quite the jump since the low 80s of a couple months ago. The $1.15 is the highest it’s been in a year a reflection of current lower pork supply and solid demand. We expect it will need to be pork cut-outs that lead hog prices higher and if the $1.15 continues lean hog prices will get closer to $1.10 than $1.00.

Last Friday’s Cut-out Values

Primal Belly $1.81 lb.

Primal Rib $1.36 lb.

Primal Butt $1.25 lb.

Primal Ham $1.11 lb.

Primal Loin $1.02 lb.

It’s not hard to see that the Pork cuts with more marbling (leading to better taste) are selling for more money. Consumers are voting with their money and making the choice for taste.

Unfortunately, Loins and Hams which make up about 50% of the primal cuts are dragging down the pork cut-out value. If we could only get as much as Butts, it would enhance the cut-out.

Butt $1.25

Ham $1.11

Loin $1.02

Our Farmer Arithmetic with Hams and Loins at $1.25 lb., Pork cut-outs would be about 10¢ lb. higher i.e., instead of $1.15 being a $1.25 lb. The 10¢ difference is about $20 per head. It’s economics on why we should be producing better tasting pork, obviously consumers will pay more for taste.

Currently there are Genesus Jersey Red Duroc bone in pork chops at retail at $7.99 lb. Long way from a cut of value of a $1.02 lb. Why $7.99? Consumers will pay for a predictable consistent better eating experience. It’s not magic. Look at what consumers will pay for steak. Some say U.S. consumers don’t have money to pay more. Go to any Texas Roadhouse restaurant in America and see the lineup. It’s not the East-West Coast elite there but working people ready to pay for a good eating experience. Taste matters to every consumer. Taste is not a niche. Better tasting pork will increase the cut-out and hog value.

Exports

Official U.S. pork exports were 16% higher year over year in May. The highest month since May of 2021. Year to date Exports up 13% over the last year. It’s positive for hog prices and cut-outs that exports have trended higher.