CIH Hog Margin Watch: March 2023


Margins deteriorated over the first half of March as a drop in hog prices more than offset a continued selloff in corn futures while soybean meal held mostly steady. USDA did not make any significant adjustments to the pork balance sheet in their March WASDE report. Annual pork production in 2023 was projected at 27.425 billion pounds, up 1.5% from last year. By quarter, Q1 production is expected to be up 1.4% year- over-year, Q2 down 1.4%, Q3 up 1.8% and Q4 production up 4.3% from 2022. The market will be eager to see if USDA makes any adjustments in their Quarterly Hogs and Pigs report at the end of the month, particularly since the number of pigs coming to market since the last report was released in December has been higher than the 2% reduction forecast. Since the first week of December, hog slaughter based on weekly data has been 31.691 million head, 152,000 or 0.5% higher than a year ago. Imports of slaughter barrows and gilts from Canada during that time has been 77,456 head higher (+40%) from a year ago, which explains about half the difference but not all of it. Given the larger supply, demand has been a particular focus lately. Pork export sales have started the year on a strong note, and recent price increases
in the EU have made US product more competitive on the world market. January exports of fresh, frozen, and cooked pork were 189,579 MT,
up 9.2% from last year while exports of pork variety meat at 43,112 MT were 36% above 2022. February exports have been in line with year- ago comparisons, although the pace of shipments has slowed down recently. A recovery in belly prices is also seen as key to help support the pork cutout this spring and summer. Our clients continue to target levels for adding new margin protection with flexible price strategies.

The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses.