October 24, 2022
Hog slaughter this year have been amazingly close to the level implied by USDA's quarterly Hogs and Pigs reports. For example, over the last seven weeks hog slaughter has been down 1.40%. The September inventory implied it would be down 1.37%.
If hog slaughter continues to match the September inventory numbers, it will be down 1.3% in November and down 1.6% in December-February.
Through mid-October, weekly hog slaughter has been down an average of 67,105 head per week (2.73%). Most (55%) of this reduction has occurred on Saturday. Through mid-October, Saturday hog slaughter has been down an average of 36,699 head per week (28.2%). During the same period non-Saturday hog slaughter has been down an average of 30,406 head per week (1.31%). The fact that most of the reduction has occurred on Saturday is an indication that packer slaughter capacity is more than sufficient to handle the hog runs thus far. Adequate slaughter capacity would be expected to show up in tighter packer margins, and it has. During the first nine months of the year the farm-to-wholesale pork price spread averaged 81.1 cents per retail pound compared to 85.2 cents last year.
During the first eight months of 2022 U.S. pork exports were down 14.8% with 82% of the decline being less pork shipped to China. Except for Mexico, the Dominican Republic, Colombia and South Korea, all other major foreign buyers bought less U.S. pork than in January-August 2021. USDA is predicting pork exports will be down 9.1% this year and down an additional 1.7% next year.
During the first eight months of 2022 U.S. pork imports were up 33.4% with over half of the increase being more pork from Canada. Each major foreign supplier, except Poland, has been shipping more pork to the U.S. this year. USDA is predicting pork imports will be up 25.2% this year and up another 1.9% in 2023.
USDA's Foreign Ag Service’s October publication Livestock and Poultry: World Markets and Trade predicts 2022 world pork production will be up 2.1% with 2023 production up 1.0%. Most of the increase is occurring in China. Chinese pork consumption is expected to continue outpacing their production.
Increasing pork production is expected to cause a slowdown in pork trade. This year world pork imports are expected to be down 16.9% from last year with China accounting for most of the decline.
Hog imports were 0.9% lower in the first eight months of 2022. FAS/USDA is forecasting U.S. live hog imports will be down 0.3% this year but up 0.2% next year. The number of hogs being imported is holding steady at roughly 6.6 million head per year. Well over 99.9% of U.S. hog imports come from Canada.
Barrow and gilt dressed weight has been up most of the year. Through September commercial hog slaughter was down 2.6% but because of heavier slaughter weights, pork production was only down 2.0%.
USDA expects pork production to be down 1.9% this year, but up 0.7% next year.
The national average live price for 51-52% lean hogs averaged $71.00/cwt in September, down $14.63 from the month before but up $2.16 from a year earlier. USDA is predicting fourth quarter 2022 and first quarter 2023 live hog prices will average $63/cwt. Liveweight prices for 51-52% lean hogs averaged $67.29/cwt in 2021. USDA is forecasting 2022 at $71.08/cwt and 2023 at $67/cwt.
Iowa State University estimated farrow to finish hog profits for September at $8.20 per hog marketed. September was the eighth consecutive profitable month for hog sales, but it was the lowest monthly profit in this streak.
The ISU calculations put September cost of production at $98.34/cwt of carcass, the lowest since May. As you would expect, cost of production is driven largely by feed prices.
The October USDA WASDE has corn prices for the grain marketing year that started on Sept. 1 averaging $6.80/bu. They are predicting Decatur soybean meal will average $390 per ton.
Corn futures are trading $6.80 to $6.90 through early summer.
Inflation is having a major impact on food prices. The retail price of pork averaged a record $5.00 per pound in September. That was up 28.4 cents from a year ago and up 5.6 cents from last month’s record. Prior to 2022 the record high for retail pork was $4.823 set in November 2021. Thus far we have had six new monthly records this year.
Lean hog futures contracts are trading in the high $80s for December and the low $100s for next summer. The December 2023 contract is $6.00 lower than the December 2022 contract.
Later today USDA will release the Cold Storage report for Sept. 30, Poultry Slaughter for the month of September, and the Crop Progress estimates for Oct. 23.
Source: Ron Plain, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. The opinions of this writer are not necessarily those of Farm Progress/Informa.
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