This past week saw continued pressure on U.S. hog markets as Lean Hogs continue their drop from summer highs.
- Last week’s slaughter was 2,243,000, almost the same as last year’s same week of 2,248,000. Year-to-date slaughter is down 3.3%.
- Iowa – S. Minnesota slaughter weights a week ago 277.7 lbs. the year before 278.9 lbs. Hog inventory is certainly not backed up.
- Average Lean Hog Futures on Friday average from September 2022 – August 2023 – 92.73. What’s the over/under on that?
- We have been writing about Europe’s sow liquidation ongoing for months. Last week the United Kingdom released its sow inventory for June. Compared to a year before down 18%. A real reflection of the financial challenge in the UK and much of Europe have faced. The current carcass price in the UK is 198.40 British pounds/kg ($1.05 U.S. lb.) (what we understand is a record price). In February it was 138.1 (85¢ U.S. lb.). The price increase to date is from about 3% less hogs year over year. What happens when it is 18%? At the current prices, producers in the UK are losing money due to high energy costs.
In our opinion, Europe will be seeing less pork production per month year over year for the foreseeable future. This will push hog prices ever higher.
- Avian Flu seems to be acting up again. Reports in the U.S. and France are indicating renewed activity. It seems to hit mostly Turkey and Egg flocks in the U.S. Broilers in France. A 3 million commercial Table Egg Layer flock broke in Ohio a week ago. In the last couple of weeks, 600,000 Turkeys in California and Minnesota hit. Turkeys a big item for Thanksgiving are hitting record prices around $1.50/lb. up about 24% from the prior year. Higher Turkey prices are probably supportive of Ham prices, especially during the holiday season.
- The USDA is projecting Beef production to fall by almost 2 billion lbs. (-7%) in 2023 compared to 2022. The U.S. – Canada inventory report for July 1st was just released.
|Cattle and Calves||114,875||113,445||111,090|
Almost 4 million less cattle from 2 years ago with the ongoing drought in the U.S. west there’s a good chance liquidation continues. Less Beef is price supportive for Pork. Beef cut-outs are $2.65 U.S./lb. Pork is $1.03 U.S./lb. Consumers are willing to pay more for Beef. Why? Is it our industry’s failure to deliver a better-tasting product?
Current weekly Beef Production is about 500 million lbs. a week. The USDA estimate of almost 2 billion less lbs. of Beef in 2023 would equal to 4 weeks of production disappearing. That’s a lot of meat not available.
- USDA is projecting Latin American pork production to increase slightly in 2023 (0.4%). They expect less exports and more imports. Consumption they believe will have a significant jump of 3.3%.
Mexico the U.S. largest pork export market is projected by the USDA to increase imports by 8.2% compared to 2022 from 1.155 – 1.250 million tons.
According to public data, 17 publicly listed pig companies lost a total of 21.819 billion RMB ($3.50 billion U.S.) in the first half of 2022.
|Muyuan||-6.871 billion RMB (-$991 million U.S.)|
|Zhengbang||-4.009 billion RMB (-$578 million U.S.)|
|Wens||-3.864 billion RMB (-$557 million U.S.)|
Lots of money lost. These enterprises all with over a million sows at the beginning of 2022 are a reflection of the situation that China’s industry was in the first half of the year and the last half of 2021. The losses have cut China’s sow herd significantly and like Europe will see continued year-over declines in production for the foreseeable future.