Higher wholesale pork prices boost packer spread in July

USDA livestock economist says increased breeding animal slaughter signaling downsizing.

Krissa Welshans, Livestock Editor

August 18, 2023

3 Min Read
National Pork Board

July was another month in 2023 when most pork producers would have been fortunate to break even, USDA livestock economist Mildred Haley noted in the agency’s most recent “Livestock, Dairy, and Poultry Outlook.” Federally inspected (FI) July hog slaughter was 3.2% higher than a year ago at an estimated 9.6 million head. Estimated FI pork production, at roughly 2 million pounds, was about 2% higher than year-ago levels due to lighter July 2023 average dressed weights. Seasonal heat and high feed costs contributed to weights averaging about 2.5 pounds below those of last July, Haley noted.  

Lighter dressed weights might also explain the relation of July slaughter to the 180-pound-and-over category of the June “Hogs and Pigs” report, she added.

“The number of hogs that were slaughtered during the period when these animals achieved slaughter weight— which encompassed most of July—was slightly higher than the number implied in the June report. This suggests that some animals may have been pulled forward; that is, the slaughter of lighter weight animals lowered the already-lower July dressed-weight average even more,” she said.

July prices of live equivalent 51-52 percent lean hogs averaged $73.92 per hundredweight (cwt), 12% lower than a year ago. Meanwhile, wholesale pork carcass values averaged $112.17/cwt. in July, scoring another high for 2023 and continuing a summer surge that began in June, the report noted.

Still, while the July cutout was almost 7% below that of July 2022, both the June and July cutout values show departures from the sluggish pace of the first five months of 2023. Haley said the higher pork cutout values were likely driven by a seasonal component—vacationing consumers patronizing quick-service restaurants while traveling, combined with outdoor grilling of ribs, smoking picnics, loins, etc. Additionally, she said high prices of other proteins like beef are likely inclining consumers to substitute pork cuts.

“Increasing wholesale pork prices, compared with other relatively more expensive substitute meats, seemed to have hit a seasonal sweet spot with consumers beginning in June and continuing through July. This factor combined with lower-than-year-earlier July hog prices resulted in higher per hog packer spreads relative to last year, even in an economic environment favoring lighter dressed weights.”

The July packer spread averaged almost $41 per head, a 25% increase from July 2022.

Increased U.S.-origin breeding animal slaughter signals downsizing

Interestingly, U.S.–origin breeding animals as a share of weekly FI hog slaughter has been elevated since early May, the report relayed. A result of the economic losses this year, Haley said one indicator that the U.S. pork industry may be downsizing is the rising share of sow and boar slaughter as a percent of total weekly FI hog slaughter. This has been occurring since late spring 2023. The figure shows the share of breeding animals (sows plus boars) as a percent of weekly FI hog slaughter, corrected for imports of Canadian sow and boars for slaughter. Haley noted that from week 18 (ending May 6, 2023) through week 30 (July 29, the latest available), the calculated share of the breeding stock slaughter is mostly above a year ago and/or the 5-year average share of the ratio.

“Prolonged levels of elevated breeding stock slaughter—under circumstances of financial stress—are consistent with industry contraction,” she explained. “The industry typically reverts to lower percentages of breeding stock slaughter when pork market supply and demand are realigned, and hog production and pork processor profitability is restored.”

About the Author

Krissa Welshans

Livestock Editor

Krissa Welshans grew up on a crop farm and cow-calf operation in Marlette, Michigan. Welshans earned a bachelor’s degree in animal science from Michigan State University and master’s degree in public policy from New England College. She and her husband Brock run a show cattle operation in Henrietta, Texas, where they reside with their son, Wynn.

Subscribe to Our Newsletters
National Hog Farmer is the source for hog production, management and market news

You May Also Like