June 26, 2023
USDA will release the results of their June hog inventory survey this coming Thursday. I expect it to show a slightly smaller swine herd than at this time last year with the market hog inventory down 1% or so. I expect the report to show farrowing intentions for the summer and fall to be down roughly 3%. Red ink for hog producers is the primary reason for the lack of herd growth.
Sow slaughter has increased in recent weeks. Over the most recent seven weeks with data, sow slaughter was up 7.4%. Over the same period barrow and gilt slaughter was up only 0.1%.
Any revisions in past hog survey numbers should be small in the June report. Since the first of March hog slaughter has been up 1.2%. The March Hogs and Pigs report predicted it would be up 0.5%. USDA has been doing a good job on their hog inventory calculations in recent quarters. Any number that ultimately gets revised by less than 1% is well forecasted.
Economists at Iowa State University estimate the loss for hogs marketed in May at $38.43 per head. May was the seventh consecutive month with red ink. The seven-month average is a negative $31.24 per head marketed. The ISU calculated cost of production for hogs marketed in April was $76.55/cwt (live) or $102.07/cwt (carcass). This was the second highest cost since September 2012. Hopefully fall will bring lower feed prices and lower cost of production.
Hog prices have rallied in recent weeks. Cash prices averaged $81/cwt in the last week of May. They averaged $94/cwt last week. The bad news is that the seasonal price trend is for lower prices until the year's end.
The average live price for 51-52% lean hogs in May was $55.35/cwt. This was 3.68 higher than the month before but $18.73 lower than a year earlier.
During May retail pork prices averaged $4.728 per pound, up a tiny 0.1 cent from the month before but down 15.8 cents from a year earlier. During January-May retail pork prices averaged $4.754 per pound, down 1.5% compared to the same period last year.
Packer margins were extremely tight last month. The farm-to-wholesale price spread was 54.2 cents per pound in May. That is the lowest month since March of 2020.
The wholesale-to-retail price spread (retailer's margin) was $3.258 per pound during May. That is the second highest of record and only 4 cents below the record set in April.
Hog slaughter weights have been down most of the year. To date, hog slaughter is up 1.2% but due to light weights pork production is up only 0.4%.
International trade has been a positive thus far in 2023. Pork imports during January-April were down 23.8%. USDA expects pork imports to be down 20.5% this year but up 8% in 2024.
During the first third of 2023 pork imports equaled 4.1% of U.S. pork production and pork exports equaled 24.5% of production.
Pork exports during January-April were up 8.7%. USDA expects pork exports to be up 7.3% this year and up 0.2% next year.
The July lean hog futures contract closed Friday at $91.275/cwt, down $17.605 from where it started the year, but $16.495 higher than in late May. Hog futures indicate a decline in hog prices to the end of 2023. The July 2024 lean hog futures contract is currently trading $5.32 above the 2023 contract.
USDA is predicting 2023 pork production at over 27 billion pounds (up 1.4% year-over-year) and live hog price at $56.70/cwt. For 2024 they have pork production down 0.1% and prices up 9%.
USDA predicts both corn acreage and yield per acre to be higher this year than last. USDA is forecasting $4.80 per bushel for corn during the upcoming marketing year. That is down $1.80 from the current year. USDA expects soybean production to increase 5.5% this year leading to a 18% decline in soybean meal prices. Of course, a hot dry summer would change things.
The nearby corn futures contract (July 2023) ended last week at $6.3075 per bushel. All of the deferred corn contracts are currently trading under $6.00, although some contracts are just barely under.
On Friday June 30 USDA's Acreage report will come out. This updates the data from the March Plantings Intentions report giving a more accurate look at crop acres this year. Acreage is important but drought conditions in parts of the corn belt have many worrying more about yield.
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