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. 

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One might think that level of retail price would translate into some very high hog prices; but it hasn’t. The average live price for 51-52% lean hogs marketed in October was $58.08/cwt, down $9.70 from a year earlier. That is the lowest since May and roughly $11/cwt below the cost of production. 

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Hog prices have been down for all but the first two weeks of the year. Prices have been down by $10 or more for 39 weeks thus far in 2023.

Iowa State University economists’ calculations of Iowa hog farm profits says producers lost $18.52 for each hog marketed in October. Producers have now had losses in 10 of the last 12 months.

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The reason for the contrast between hog prices and retail pork prices is the farm-to-retail price spread. It was a record $4.056 per pound during October, breaking the old record of $3.906 set the month before. The wholesale-to-retail price spread (retailer’s margin) was $3.362 per pound in October, also a record high, breaking the old record of $3.298 set in April. A wide price spread is tough on hog prices.

The retailer’s margin was record high, but that was not the case for the packer margin. The farm-to-wholesale price spread was the lowest since June and only 86% of the three-year average. Packers are less likely to chase hogs when their margins are tight.

Hog and pork demand has been weak this year. Compared to the year before, hog demand was down each month from February through October. Export demand for U.S. pork was down each of the first nine months of 2023 and domestic retail demand was down each of the first eight months of 2023.

U.S. pork exports are nearly six times the level of U.S. pork imports.  Through September 2023 pork imports equaled 4.2% of U.S. pork production while pork exports equaled 24.8% of U.S. pork production. International trade is a huge positive for the U.S. pork industry. During the first nine months of 2023 pork imports were down 19.6% year-over-year. During this same period U.S. pork exports were up 7.2% compared to the same period in 2022.

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USDA is estimating 2023 pork imports will be down 15.6% and forecasting 2024 pork imports to be up 3.6%. They are estimating 2023 pork exports will be up 6.1% and 2024 pork exports up 3.2%.

The average live price for hogs in 2022 was $71.21/cwt. USDA estimates 2023 will average $58.95/cwt and they are forecasting a $60/cwt average for 2024; $60/cwt live equals $80/cwt of carcass weight.

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/cwt. 

Commercial pork production totaled 26.996 billion pounds last year.  USDA is estimating 27.217 billion pounds for this year (0.8% more) and forecasting 27.73 billion pounds for 2024 (up 1.9%). The record year for U.S. pork production was 2020 with 28.3026 billion pounds. Current production is well below the record of 2020.

Barrow and gilt dressed weights have been down most all year. That is why year-to-date hog slaughter is up 1.50% but pork production is only up 0.35%. Lack of profits is likely the reason for the lower slaughter weights. When you are losing money on every pound you sell, selling fewer pounds isn’t such a bad idea.

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Over the 12 weeks since Sept. 1 hog slaughter has been up 1.8% compared to the same period last year. This is higher than the 0.6% increase implied by the market hog inventory in the September Hogs and Pigs report. Look for USDA to make some upward revisions to the September market hog inventory when they release the December Hogs and Pigs report.

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Per capita pork consumption in 2024 is forecast to be up 0.4 pounds (0.8%).

Corn prices have moderated. USDA predicts the farm price of corn will average $4.85 per bushel during the 2023-24 marketing year, down $1.69 from the previous marketing year and down $1.15 from the year before that. Corn prices are expected to trend higher for the next 18 months. The futures market is trading December 2023 corn at 4.63/bushel. Each subsequent corn contract is trading higher through the May 2025 contract at $5.25/bushel.

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The futures market expects hog prices to follow the seasonal pattern and move higher from winter until summer then decline until winter returns. There is also an upward price trend expected. The December 2024 contract is trading $5-6/cwt above the December 2023 contract.   

Unfortunately, there is little or no profit to be had if hog prices end up close to forecasts. Hog cost of production ($/cwt of carcass weight) is likely to be in the low $90s for most of 2024.