Hog producer margins were signalling contraction a year ago, but as producers are cycling out of higher priced rations, concern is easing this year, according to a recent market report from CoBank. 

Iowa State University estimates farrow-to-finish operators experienced their fifth consecutive month of positive margins in August at $13.63/head. And naturally, sow slaughter has declined in recent months. For August alone, sow slaughter was down 15% YoY. Still, the breeding herd was down 3% YoY on Sept. 1, at 6.044 million head which is an eight-year-low. Pigs saved per litter has continued to rise in recent quarters reaching an all-time high of 11.72 during June-August, offsetting a declining breeding herd.

After peaking in July, lean hog futures are declining seasonally. Margins are expected to narrow through the end of the year. Non-feed costs remain elevated and interest in expansion is nil, so pork prices should hold their own through 2024 – yet slaughter numbers move higher in the autumn, so the market will be tested. Global pork demand remains robust; as focus on supporting global pork needs subsides in the European Union, US pork is gaining a competitive advantage in global markets and will likely overtake Europe as the leader in pork exports this year.

The pork cutout was down 7% YoY in August, the ham primal was the biggest contributor to broad-based support. California Prop 12 influence was greater in 2023, as end users prepared for restrictions on pork. This year, markets have adjusted, and belly prices have softened. Total pork in cold storage was at 453 million pounds, down 3.4% YoY, but hams were at a three-year high, up 2% YoY indicative of building for holiday needs.