November 28, 2022
The retail price of pork averaged $5.047 per pound in October. That was up 23.1 cents from a year earlier and up 4.7 cents from last month's record. Prior to 2022 the record high average for retail pork was $4.823 per pound set in November 2021.
Thus far, we have had seven new monthly records this year. It is inflation, not a pork shortage, that is behind this string of records. Per capita pork supply is expected to be 51.4 pounds per capita this year. Pork production is down slightly (2%) this year, but imports are up 20% and exports are down 9%; thus the per capita pork supply is 0.3 pounds more than last year.
The odds are not good for more retail price records this year. The seasonal price trend is lower at this time of year. Domestic pork demand was strong in the first half of 2022, but is showing signs of weakening in recent months.
The retail price records are not translating into record hog prices, or anything close to a record. The average live price for 51-52% lean hogs sold in October was $67.78/cwt. That was $3.22 lower than the month before and only 49 cents higher than the average for 2021. The 51-52% live hog record is $95.17/cwt set in July 2014. USDA is forecasting a live hog price average of $71.33/cwt for this year and $67 for next year.
The lean hog futures contracts are indicating a $20/cwt plus increase in carcass hog prices from December to July. The December 2023 contract is less than a dollar lower than the nearby contract. Futures are not as optimistic about summer prices.
Pork belly prices tumble. Of the major pork carcass primals, ribs and pork bellies are typically the two most valuable. Ham and picnic wholesale prices are usually less than the pork cutout value. Last year the average price of the ham primal was less than half the belly primal. Last Friday the wholesale primal value for pork bellies was $93.17/cwt and the wholesale primal value of hams was $97.31/cwt. Thus, ham prices averaged $4.14/cwt higher than bellies.
The last time hams were higher than bellies was briefly in December 2020. Part of this is the seasonal pattern. Ham prices tend to be strong in the fourth quarter (think ham for the holidays) and belly prices weak.
Hog slaughter this year have been surprisingly close to the level implied by USDA's quarterly Hogs and Pigs reports. Over the last 13 weeks hog slaughter has been down 1.47%. The September inventory implied it would be down 1.37%.
If hog slaughter continues to match the September inventory numbers, it will be down 1.6% this winter (December-February). USDA will begin their quarterly survey of the nation's hog herd later this week. The report comes out on Dec. 23.
During the first nine months of 2022 U.S. pork imports were up 27.9% with over 57% of the increase being more pork from Canada. Every major foreign supplier, except Poland, has been shipping more pork to the United States this year. USDA is predicting pork imports will be up 20.7% this year, but down 1% in 2023.
January-September 2022 U.S. pork exports were down 13.3% with 80% of the decline being less pork shipped to China. Philippines and Japan also have been buying less U.S. pork this year. USDA is predicting pork exports will be down 8.8% this year and down an additional 2.0% next year.
Hog prices are at close to breakeven. Iowa State University estimated farrow to finish hog profits for October at a tiny 10 cents per hog marketed. October was the ninth consecutive profitable month for hog sales. It is very likely that November and December will have negative returns.
The Iowa State calculations put October cost of production at $97.87/cwt of carcass, the lowest since May. Cost of production is driven by feed prices. Corn futures are currently trading in the $6.60 to $6.75 range for the next six months. If that holds then hog cost of production should stay close to current levels.
Pork in cold storage at the end of October totaled 511 million pounds, up 15.5% year-over-year. Frozen pork stocks dropped during the COVID struggles packing plants faced in May of 2020. Pork stocks stayed under 500 million pounds from June 2020 through March of 2022. Since March stocks of frozen pork have been between 500 and 600 million pounds.
Hog imports were down 2.1% (107,319 head) in the first nine months of 2022. Hog exports were down 7.2% (2,690 head). FAS/USDA is forecasting U.S. live hog imports will be down 0.3% this year but up 0.2% next year.
Hog weights usually move higher once the weather cools in the fall. The seasonal increase has been smaller than normal this fall. Slaughter weights are climbing but slowly, especially for the Iowa-Minnesota-South Dakota data series. That live weight series has been below the year-ago level for the last 16 weeks and at least five pounds less for the last four weeks. The weight lag is not as pronounced for the national carcass weight data.
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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