Hog slaughter lower than expected
The strength in September retail pork prices didn’t do much for cash hog prices.
The December lean hog futures contract has done well in recent weeks. Perhaps the main reason for the strong price performance by the December hog contract is that hog slaughter has been lower than indicated by the September hog inventory survey. On Sept. 27, the day after the September Hogs and Pigs numbers came out the December lean hog futures contract closed at $73.38/cwt. Last Friday the December contract closed at $79.675/cwt. That is a gain of $6.29.
Hog slaughter over the last eight weeks was up a slim 0.05% year-over-year. That was much smaller than the 4.3% increase indicated by the heavy weight market hog inventory in the September Hogs and Pigs report. This is the largest USDA miss in some time.
The average retail price for pork in September was $4.954 per pound. That was 5.6 cents higher than the month before, but 2.2 cents lower than the same month in 2023. This was the highest monthly average retail price since October 2023.
The strength in September retail pork prices didn’t do much for cash hog prices. The September average liveweight price for 51-52% lean hogs was $61.26 per cwt. This was $3.65 lower than the month before and $1.12 lower than a year earlier. September hog prices were the lowest since March.
Based on the market hog inventory in the September Hogs and Pigs report, hog slaughter in November should be up 2.5% and December-February slaughter down roughly 1.4%. This assumes fall and winter hog slaughter lines up with the survey’s market hog inventory better going forward, than it has the last two months.
During the first eight months of 2024 U.S. pork imports were up 4% and pork exports were up 4.6% compared to the year before. Imports from Canada were down but pork shipments received from Brazil, Denmark and Netherlands were up. U.S. pork exports to South Korea, Mexico and Colombia were up but shipments to China were down.
USDA/Foreign Ag Service is predicting that world pork exports will be up 2.2% this year and up 1% next year. USDA is predicting U.S. pork exports will be up 4.8% this year and will increase another 3.4% next year. USDA is predicting the U.S. will displace the European Union to become the world’s top pork exporting country both this year and next.
U.S. pork imports are forecast to be 539,000 metric tons this year, up 4.1% and the most since 2023. It is forecast at 547,000 metric tons next year, up 1.5%. The U.S. is the sixth largest pork importer after Mexico, Japan, China, South Korea and United Kingdom.
Through August, U.S. pork imports equaled 4.1% of pork production and pork exports equaled 24.5% of U.S. production.
World pork production for 2024 is forecast by USDA to total 116 million metric tons, down 0.2% from last year. Production is forecast to decline an additional 0.8% next year. The two-year decline is due to an expected 4.2% decline in China’s production.
Through August live hog imports from Canada were up 0.5%. USDA is forecasting that the U.S. hog import total for 2024 will be 6.771 million head, up 0.4% from last year. USDA is predicting a decline of 3.0% (206,000 head) in hog imports next year. That will be the lowest level since 2022. U.S. hog exports are roughly 1% of hog imports.
Calculations by economists at Iowa State University put profits for typical Iowa hogs sold in September at $7.76 per head. That was $19.69 better than a year earlier and was the sixth month of black ink following seven consecutive months of losses.
Corn prices have dropped dramatically in the last two years. Last year began with Omaha corn prices at $7 per bushel and ended with cash corn at $4.80/bu. This year started with $4.75/bu. corn and it is currently at $4/bu. USDA has the 2024-2025 marketing year forecasted to average $4.10/bu.
Lower corn prices are contributing to lower production cost. Iowa State University estimated the cost of production for hogs marketed in September at $62.36/cwt (liveweight) or $83.14/cwt on a carcass weight basis. This was $8.64 lower than a year earlier and the lowest production cost for any month since December 2021.
Corn futures are stable with indication of modest increase ahead. The December 2024 contract is trading around $4.15; the 2025 contracts are trading between $4.25 and $4.50 and the 2026 contracts are $4.50 to $4.70.
As often happens, the return of profits boosted hog market weights. The first three months of 2024 had red ink and hog dressed weight average a pound lighter than a year earlier. Each month April through September was profitable. The average dressed weights in April to September were up 2 pounds year-over-year.
Through September U.S. hog slaughter was up 1.67% and because of heavier weights U.S. pork production was up 2.13%.
Over the past 20 weeks U.S. sow slaughter has been 8.4% lower than the same period in 2023. This is a big change. Time will tell if reduced sow slaughter is precursor to breeding herd expansion.
Hog futures indicate prices will follow the typical seasonal pattern: higher from December until early summer, then declining until year’s end. The lean hog contracts for this winter (December 2024 until April 2025) are trading well above those for 12 months later.
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