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Weak consumer demand plagues hog sector

Economist says hog prices will likely spend most of 2024 below cost of production.

Krissa Welshans

November 28, 2023

3 Min Read
NPB

Pork producers continue to face macroeconomic turbulence and market uncertainty caused by the implementation of hog production regulations in some States that could affect pork production nationwide. But the most serious problem faced by hog producers all year has been generally weak consumer demand for their product, according to USDA’s latest “Livestock, Dairy, Dairy and Poultry Outlook.” The weak consumer pork demand has been reflected in low hog prices, which in turn have translated into below breakeven price levels for most of the year, the report noted.

Rather than reducing the breeding herd, USDA’s quarterly “Hogs and Pigs” report in September showed that producers have opted to limit losses by marketing hogs at year-over-year lower weights. USDA economist Mildred Haley reported that dressed weights through September have so far averaged 2.4 pounds below those in 2022. This, she said, will likely continue “until the market signals consumer willingness—with higher prices—to compensate producers for the costs of putting additional weight on hogs.”

University of Missouri Professor Emeritus Ron Plain reported in National Hog Farmer this week that the average retail price of pork during October was $5.043 per retail pound, the second highest ever and only 0.4 cents (0.1%) lower than the record set in October 2022. While one might think this would translate into higher hog prices, this has not been the case, he pointed out. In fact, the average live price for 51-52% lean hogs marketed in October was $58.08/cwt., down $9.70 from a year earlier. This is also the lowest price since May and roughly $11.00/cwt. below the cost of production, he added. Still, hog prices have been down for all but the first two weeks of the year.

Calculations by Iowa State University economists of Iowa hog farm profits revealed producers lost $18.52 for each hog marketed in October. Plain said this means producers have now had losses in 10 of the last 12 months.

The average live price for hogs in 2022 was $71.21/cwt. USDA’s 2023 price forecast is currently $58.95/cwt. For 2024, USDA is forecasting a slight increase to $60.00/cwt.

“It looks like hog prices will spend most of the coming year below the cost of production. Only the June, July, and August lean hog futures contracts for 2024 are currently trading over $90.00/cwt.,” Plain noted.

He further noted that the futures market appears to expect hog prices will follow the seasonal pattern—moving higher from winter until summer, then declining until winter returns. The December 2024 contract is trading $5.00-$6.00/cwt above the December 2023 contract.  

Unfortunately, Plain said there is “little or no profit” to be had if hog prices end up close to forecasts as hog cost of production is likely to be in the low $90s for most of 2024.

Iowa State University Livestock Economist Lee Schulz has forecasted an average annual loss of $18 per head in 2024. If realized, he said 2023 and 2024 will go down as the worst two year stretch for profitability in hog production, even eclipsing the infamous losses in 1998 and 1999.

About the Author(s)

Krissa Welshans

Livestock Editor

Krissa Welshans grew up on a crop farm and cow-calf operation in Marlette, Michigan. Welshans earned a bachelor’s degree in animal science from Michigan State University and master’s degree in public policy from New England College. She and her husband Brock run a show cattle operation in Henrietta, Texas, where they reside with their son, Wynn.

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