12 December 2023

3 minute read

By: Jim Long

North America

This past week the US hog market saw much of the same. Lots of hogs, prices below breakeven. Equity loss per week of the North American swine industry in the neighborhood of $100 million in our estimation. A war of attrition is ongoing. It's a story of Last Man Standing.

It's a sad testimony to our industry and where it is that we all know the only way for the market to correct is for producers to go out of business to cut supply. The loss of the percentage total meat consumption that the pork industry has suffered near the last couple decades indicates that increased pork demand isn’t going to save us. Today only less pigs will correct the market.

A reflection of the lacklustre pork demand can be seen in beef and pork cut-outs. Last Friday beef $2.88 lb. pork 85.67¢ lb. Beef is three times the price of pork. US beef production is down a whopping 5.2% this year. Pork, it appears cannot increase demand in the face of less beef and its higher price. It’s obvious consumers prefer to spend their money on beef. All the consumer surveys indicate that number 1 desire taste – flavor. The big price spread between beef – pork is a real-world plebiscite on the pork we produce as an industry.

As an owner of a World Mega Producer company said to us recently, “We can’t continue doing the same thing, it's not working.”

We need to stop thinking as farmers but as marketers. If consumers want “taste – flavor” as number 1, produce what they want. It's about more than surviving but prospering.

Observations

• We expect the US sow herd on December 1 will be down below 6 million for the first time.

• US cash early wean pigs averaged $32 last week. The highest since April but still $10 a head below cost of production. A year ago, they were $52.

• USDA last week estimated US average hog weight slaughtered 289 lbs., a year ago 292 lbs.

• China seems to be an uptick in African Swine Fever. Losses continue in the $30-50 per head range. The two factors will be leading to ongoing liquidation.

• Year to date US red meat production is 1.3 billion lbs. less than a year ago (-2.4%). USDA is estimating 2024 to be down a further 500 million lbs. USDA continues to estimate 2024 US Pork Production to increase about 500 million lbs. (+2%) from 2023. It would be a gravity defying accomplishment, that after 15 months of swine financial losses the industry expands production. Looking at historical production data it would be the first time in history that this would happen. If it is correct, it would suggest that making money is not a necessity for businesses to expand. If USDA is correct the pork industry would set a new paradigm in the history of capitalism.

We strongly believe there be less pork in 2024 than 2023. Lean Hog Futures have significant upside to where they languish today.