18 October 2023

4 minute read

By: Jim Long

North America

After many months of losses, the U.S. hog industry has the dilemma of several months more of losses if lean hog futures are any indication. Lean hog futures last Friday ranged from 69.53 to 81.28 from now till May. In May 86.75 futures are about a breakeven at current feed prices for many producers.

According to Iowa State University the cost in September to produce a 12 lb. early wean pig was $43.58 (current market $24). Farrow to finish breakeven was 71¢ lb. liveweight (93¢ lean lb.) including a $5.70 per head credit for manure (current market 84¢ lean). Lower feed prices should lower break evens in the coming months.

The bottom line as we speak to producers and industry participants there is little optimism.

The September 1 USDA Hogs and Pigs Report did nothing for positivity. Most find it incredulous that it indicated only a 17,000 U.S. sow liquidation from March 1 to September 1, 6 months in a time of losses of $30 per head being experienced? Sow slaughter significantly higher? Gilt sales evaporating? Sow mortality continues at record levels? Large scale liquidation of sows by major producers and others USDA reported? Farrowing intentions 5% lower than a year ago. All we believe in the face of daunting reality the USDA projection that the U.S. will go from producing 27,304 million lbs. of pork in 2023 to 27,910 million lbs. in 2024? If Las Vegas had odds on this happening, we would bet the farm on the opposite and going with less pork in 2024 as the reality.

USDA does next to nothing for the hog industry. There is support money for corn, soybean, ethanol, milk, etc. Hog producers are left mostly on their own. All the commodities got CFAP top ups except hogs. We never got the over $700 million that the Trump Administration had approved but was stopped when new administration came in.

Our point is the USDA does next to nothing for the Pork Industry relative to other Ag-Commodities. Our well-paid leadership at NPPC and National Pork Board have been less effective lobbying for USDA support if measured to other commodities. Then top it off with the USDA projections of no liquidation and more pork in 2024 to sabotage any market optimism.

Europe

Europe has about twice as many sows and hogs as the U.S. Two and three years ago the European swine industry suffered from major financial losses. There were about 1 million sows liquidated. The consequences are the first half of 2023 Europe produced 8.5% less pork than in 2022. Prices went to record levels. They have come down from those record levels recently as seasonal production has increased. Financial losses always lead to fewer pigs and higher prices. It happened in Europe and it's coming in the USA.

China

China Pork Industry continues to suffer from lack of profits. A week ago, the national early wean price was 162 RMB or $22 per head. Corn in China is over $10 bushel. It doesn’t take an ag economist to know a $22 early wean pigs is a reflection of negative industry optimism and profitability reality and expectation. All indications are the China sow herd continues to liquidate and is still being hit by African Swine Fever. Just like in Europe financial losses will cut production to levels that will bring profitability. At some point that dog will hit the end of the chain. The billion-dollar question is when.

Summary

It's sad the only way our industry can get profitable is by cutting production after losing lots of money. As a large producer said to us a while ago “We can’t keep doing the same thing, we need change.” He then asked when we were going to Costco? We need to drive demand and get more consumers to eat more pork. Chicken has been able to grow their per capita consumption. We have been to lots of pork meetings. We can’t remember many that discussed how to grow pork demand? Maybe taste? Most industries would see demand and increased sales as key components of success.