July 24, 2023
After eight consecutive months of losses, hog prices have finally reached a breakeven level for many producers. The base carcass price in recent days has been bumping around $104/cwt. Breakeven is around $102/cwt. Unfortunately, this has come at a time when the seasonal trend is for lower hog prices ahead.
The futures market is still a firm believer in the traditional seasonal pattern for hog prices. The lean hog futures contracts indicate hog prices will decline until December then rally until early summer. As of last Friday, only the nearby August contract was trading above $100/cwt ($100.67). All the deferred contracts are currently below $96/cwt.
The 51-52% lean live-weight hog price averaged $63.06 in June, the highest month since November. Through June the 51-52% lean price has averaged 21% below last year's level.
Calculations by the Economics Department at Iowa State University indicate the average Iowa producer lost $18.81 for each hog marketed last month. This was the eighth consecutive month with red ink. ISU estimated June carcass breakeven at $101.84/cwt.
Hog slaughter has tracked close to the level indicated by the June market hog inventory survey. In the seven weeks since the start of June, hog slaughter has been up 0.8%. The June Hogs and Pigs report indicated recent slaughter would be even with last year. The June report implied monthly hog slaughter during August to November will be between even and up a quarter of 1%.
The average retail price for pork during the month of June was $4.684 per pound. That was the lowest month since August 2021. Surprisingly, in June we had the highest hog prices in seven months and the lowest retail pork prices in 22 months.
This has been a disappointing year for pork demand. During the first half of 2023 per capita pork consumption was down 3% and the retail pork price was down 2%. Lower prices and lower sales are not a good combination. Whether measured at the retail level, the wholesale level, the export level, or the hog level, pork demand was down in the first half of 2023.
Weak demand for bacon has been a key part of the declining demand for pork. The average retail price of sliced bacon during the first half of 2023 was $6.521 per pound. That was 76.4 cents (10.5%) lower than the year before. The average primal value for pork bellies during the first half of 2023 was $90.10/cwt. That was $81.40 (47.5%) lower than a year earlier.
In the first six months of 2023 pork cutout value was down 19.5% and pork bellies were down a whopping 47.5%.
Pork prices have rallied a great deal in the last few weeks. In the last eight weeks pork cutout value has increased 37.77% and pork bellies have increased an amazing 152.23%. Hams have increased 34.58% and loins have increased 18.58%
Hog slaughter weights have been light most of the year. Through early July year-to-date hog dressed weights are averaging two pounds less than at the same time last year. Year-to-date hog slaughter was up 1.2% but because of lighter weights year-to-date pork production was only up 0.3%.
It is remarkable how low hog prices have been given the modest increase in pork production. During the first half of 2023 pork production was up 0.9% but hog prices were down 21%. In the first six months pork cutout value was down 19.5% and retail pork prices were down 2.1%.
International pork trade has been a positive factor this year. Through May, pork imports were down 24.2% and pork exports were up 9.6%. Most of the major suppliers of pork were shipping less pork to the U.S. Through May, 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 to be down 20% and pork exports up 9%. USDA is forecasting next year's pork imports will be up 7.5% and pork exports up 1%.
USDA is predicting that 2023 pork production will total 27.371 billion pounds, up 1.4% from last year and 0.1% higher than their forecast for 2024. USDA is forecasting that 51-52% lean live weight hog prices will average $57.90/cwt this year. That is $13.31 (18.7%) less than last year and $7.10 (10.9%) less than their forecast for next year.
USDA is forecasting 2023 per capita pork consumption will be down 0.3 pounds and it will fall another 0.2 pounds next year.
The futures market expects corn prices to soften as we move into harvest then slowly strengthen until next summer. The futures price range currently expected is $5.27 to $5.56 per bushel.
USDA is forecasting the 2023-24 marketing year corn price will average $4.80/bushel, down from $6.60/bushel for the current year.
USDA's weekly Crop Production report comes out today and the July Cold Storage report comes out Tuesday afternoon.
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