Rabobank Report: Strong Exports and Limited Supply Growth Drive Pork Industry Return to Profitability

The March USDA Hogs and Pigs report, as analyzed by Rabobank, reveals a positive outlook for the pork industry, marked by several key trends:

  1. Breeding Herd and Productivity: While there were modest declines in the breeding herd (-2.1% YOY), increased productivity (+4.6% YOY) has boosted pigs per litter. Improved herd health and the removal of less productive sow units contributed to this increase.
  2. Slaughter Trends: YTD sow slaughter increased by 5% YOY due to early depopulation efforts, but recent weeks have seen a normalization in average weekly slaughter. However, concerns arise about potential capacity constraints by late Q4 2024. Barrow and gilt slaughter remains flat YOY but is expected to trend higher in the spring/summer.
  3. Hog Prices: Prices have responded positively to stronger packer demand and limited supply growth, rising by 21% YOY. This price recovery, coupled with lower feed costs, has restored producer profitability in recent weeks and is expected to support margins through Q3 2024.
  4. Pork Prices and Exports: Pork prices have continued to rise, with the pork cutout exceeding USD 100 per hundredweight, up 30% YOY. Strong exports, particularly to Mexico, South Korea, Colombia, and Australia, have contributed to this price strength. Despite a slight rebound in pork imports, strong exports have offset this trend.
  5. Mexican Market: Mexican hog prices remain in line with year-ago levels and are 10% above the five-year average. Despite herd liquidation, increased productivity and heavier weights have resulted in a 2.6% YOY increase in pork supply. While hog prices have seen limited improvement, margins have recovered due to lower feed costs.

Overall, strong exports and limited supply growth have played a key role in the pork industry’s return to profitability, with positive trends expected to continue in the coming months.