August 28, 2023
The 51-52% lean liveweight hog price averaged $73.92/cwt in July, the highest month since the previous August. It looks like August 2023 liveweight prices will average close to $68/cwt. The seasonal trend is for lower hog prices each month until the end of the year. USDA says the 51-52% lean average price was $56.69/cwt in the second quarter and is predicting $74/cwt for the third quarter and $63/cwt for the fourth quarter. I fear USDA’s liveweight price forecast is too optimistic.
The national average negotiated prior day carcass price exceeded $100/cwt for 16 days in July and August. Last Friday it was trading in the mid $80s. The October contract is trading a bit under $80/cwt and December a bit over $72/cwt. The lean hog futures contracts imply lower hog prices each month through December followed by higher hog prices each month until July. There is nothing surprising about that.
Corn futures are trading in the high $4s per bushel for September and December and the low $5s for next year. There has been a great deal of volatility in corn futures this year. I expect it to continue. The corn futures price range for the next 16 months is currently $4.70 to $5.15 per bushel. USDA is forecasting corn prices for the 2023-24 marketing year will average $4.90/bushel, down from $6.60/bushel for the current year.
Over the last 13 weeks (roughly since the start of June) hog slaughter has been up 1.48%. The June Hogs and Pigs report indicated slaughter would be up 0.1% during this period. When slaughter is higher than expected, it is usually a drag on hog prices.
Calculations by Lee Schulz at Iowa State University indicate the average Iowa hog producer earned $9.39 for each hog marketed last month. This was the first profitable month since October. November to June losses averaged $29.68 per head per month. This was the longest string of losses since August 2012 to May 2013. ISU estimated July carcass breakeven price at $100.92/cwt, the lowest month since March. With corn prices expected to be below $5/bushel for the rest of this year, cost of production should continue to decline.
Next week USDA will begin their survey for the September Hogs and Pigs report. Historically, a period of losses like producers just experienced would lead to a sharp cutback in hog production. The August 2012 to May 2013 losses were followed by a 4.6% reduction in hog slaughter in 2014. History also notes that the 2014 drop in hog slaughter was exacerbated by a severe outbreak of PED virus.
Sow slaughter has been elevated in recent weeks. Sow slaughter by itself is far from a perfect indicator of future farrowings. The last 16 weeks saw U.S. sow slaughter 9.2% higher than the same period last year.
Retail pork prices averaged $4.704 per pound during July. That was 2 cents higher than the month before, 20 cents lower than a year ago, and the second lowest month since August 2021.
During the first 34 weeks of 2023 hog prices were down a whopping 22%. During the first 32 weeks of 2023 there were zero weeks with heavier average dressed weights, three weeks with weights equal to a year ago and 29 weeks with heavier dressed weights.
During the first 34 weeks of 2023 hog slaughter was up 1.4%, but due to lighter slaughter weights pork production was only up 0.4%. The extremely low hog prices of recent months are not due to the small 0.4% increase in 2023 pork production. If not increased supply, then weaker demand. Retail pork demand has been lower than last year for each of the last 12 months. Export demand for pork has been down for 20 of last 21 months. Hog demand has been down for each of the last 10 months. The weakness in hog demand is related to the tight margins hog packers have been facing this year.
Pork cutout value was quite low during the first half of 2023. During the first 34 weeks of 2023 pork cutout value was down 16.5%.
USDA is predicting that 2023 pork production will total 27.264 billion pounds, up 1% from last year but 0.3% lower than their forecast for 2024.
USDA is forecasting that 51-52% lean liveweight hog prices will average $62.20/cwt this year. That is $9.01 (13%) less than last year and $2.80 (4.3%) less than their forecast for next year.
USDA is forecasting 2023 per capita pork consumption will be down 1.5 pounds and it will fall another 0.1 pound next year.
During the first half of 2023, U.S. pork imports were down 23.7% and pork exports were up 9.6%. Through June, 25% of U.S. pork production was exported, while imports equaled 4% of U.S. pork production. USDA is forecasting this year’s pork imports will be down 20% and pork exports up 9%. USDA is forecasting next year’s pork imports will be up 7% and pork exports up 1%.
USDA’s weekly Crop Production report comes out today. On Wednesday, the semi-annual U.S. and Canadian Cattle and Hog inventory reports are released.
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