It has been a tough year for hog producers.  Calculations by economists at Iowa State University indicate losses are likely to average more than $20 per head marketed this year making it the worst financial year since 2009.

The low hog prices that are driving these losses are more the result of declining demand rather than too many hogs. Yes, hog slaughter in 2023 is expected to be 1.2% higher than last year, but it is lower than in 2019, 2020 and 2021.

Packer demand for hogs has been lower than a year earlier for 22 of the last 24 months. At the retail level consumer pork demand has been lower than the year before for each of the last 13 months. Export demand for pork has been down 22 of the last 23 months. 

Why is demand so low? It’s hard to say with certainty. World pork production has been increasing in recent years as China recovers from African swine fever. Chinese pork production this year is expected to be the highest since 2014. Increased world production depresses prices. Also, California’s Proposition 12 has created uncertainty about pork sales in the most populous state.

The seasonal pattern is against hog prices at this time of year. The seasonal pattern won’t get better until after Christmas.

USDA expects pork production to increase 2.2% next year. USDA is forecasting 51-52% lean hog price will be up 2.2% in 2024. Increased prices are not the expected result from increased production. It appears that USDA is treating 2023 hog prices as a data outlier. 

Year-to-date hog slaughter is up 1.4% but because of lighter slaughter weights year-to-date pork production is only up 0.2%. Year-to-date hog prices are down 19.9% and year-to-date pork cutout value is down 15.2%. These are huge price drops for a small increase in production.

Over the last seven weeks (roughly since the start of September) hog slaughter has been up 1.5%. The September Hogs and Pigs Report indicated slaughter would be up 0.6% during this period.

The large financial losses of the first quarter of 2023 should show up as reduced hog slaughter in the second quarter of 2024.

The retail pork price average for January to September was down 2.23%. Prices have been down for the last seven months.

Hog slaughter weights have been consistently low this year. This is not surprising given all the red ink on the bottom line. The long-term trend is for slaughter weights to increase by one pound per year.

Year-to-date hog prices are down nearly 20%. Low hog prices are usually good for international trade. Pork imports in 2023 are forecast to be down 16.3%. Pork exports are expected to be up 6.6%.

Shipments of U.S. pork to China has dropped to more normal levels following the boost caused by ASF in 2020 and 2021. Fortunately, pork exports to Mexico have replaced some of the decline in shipments to China.

A small increase in hog prices in the coming year and USDA is forecasting pork imports in 2024 will be up 4.4% and pork exports in 2024 are forecast to be up 2.8%. Per capita pork consumption in 2024 is forecast to be up 0.8 pounds (1.6%).

As it usually does, the futures market expects hog prices to follow the typical seasonal pattern – lower prices until the end of the year, then higher until midsummer then lower prices until December. The futures market also indicates an overall upward movement in hog prices. The December 2024 hog futures contract is trading $8/cwt higher than the December 2023 contract. The February 2025 contract is trading $8/cwt above the February 2024 contract.

Iowa State University cost of production for September was estimated to be $94.67/cwt of carcass. That is the lowest month since April 2022. Cost of production is declining as corn prices drop far below the year-ago level. Omaha cash prices for corn started the year above $7 per bushel and just might end the year below $5. Corn futures contracts for 2024 are trading around $5.12 plus or minus a dime.

USDA is predicting farm level corn prices for the 2023-24 marketing year will average $4.95/bushel. If so, then hog cost of production is likely to be in the low $90s (carcass weight) for most of 2024.