U.S. pork supply chain price and volume data for the first four months of 2023 show that important components of the industry are operating at-or-near below year-earlier prices and margins, a USDA economist noted in the USDA’s “Livestock, Dairy and Poultry Outlook.”
Average prices of live equivalent 51-52 percent lean hogs averaged $54.04/cwt. through April, 20% below the same period last year. The average value of the wholesale pork carcass cutout through April was $81.29/cwt., also 20% below the same timeframe last year. USDA economist Mildred Haley said gross processors’ spread declined more than 23%, from an average of $10.73/cwt. last year to an average of $8.22/cwt. through April of this year.
Haley suggested that lower hog prices from January to April could have resulted from increased supplies of available slaughter hogs. USDA slaughter data show that estimated federally inspected (FI) hog slaughter for January–April 2023—with one less slaughter day than the same period last year— was about 42.1 million head, almost 3% more than for the same period of 2022. January–April 2023 estimated pork production was also about 9.2 billion pounds, which is more than 2% above the same period last year.
While at least some component of the sharp 20% decline in January–April 2023 hog prices was due to somewhat larger availability of slaughter hog supplies, Haley said the fact that processors’ demand for hogs derives from consumers’ demand for pork offers a fuller explanation of the current dynamics of the U.S. hog/pork market.
Data suggests wholesale values in 2023 have reverted to a pre-COVID dynamic, Haley pointed out.
“Not only has the U.S. economy reopened but inflation is currently a significant factor in most family food budgets, causing tradeoffs and reductions that may not have existed as recently as 1-2 years ago,” she said. “These factors have probably contributed to reduced pork demand, meaning that at almost any pork price, consumers choose to buy lower volumes of pork.”
Haley said that dynamic markets eventually adjust so that the effects of lower consumer demand feedback to wholesalers who offer processors lower bids for pork, who in turn offer lower prices for hogs to producers.
Even most hog producers are “price takers” in the sense that they cannot pass off the effects of higher feed costs to an upstream component of the supply chain, Haley said there’s a point where a hog must be sold to avoid increased costs. This is likely where a significant component of the U.S. hog production sector finds itself in 2023, she added
Iowa State University’s Estimated Livestock Producers’ Returns from farrow-to-finish operations in Iowa show that producers have operated at losses since November 2022. The losses, taken together, average almost $28 on a live equivalent basis per head, per month, Haley said.
The current hog sector dynamics have led to downsizing. USDA forecasts an accelerating decline in farrowings this year, and then stabilization in early 2024. From there, a series of modest year-over-year increases during the year, Haley suggested. Total pork production in 2023 is expected to be 27.38 billion pounds, 1.4% above last year. Pork production in 2024 is expected to be 27.35 billion pounds, only fractionally less than 2023.
USDA is forecasting 2023 hog prices will average about $56.00/cwt., almost 21% below prices in 2022. With pork demand expected to be relatively stable and supplies of beef tight, pork prices are expected to average about $62.00/cwt, about 9% above prices in 2023.