The quarterly survey of hog operations suggests that pork supply in 2024 will be modestly higher than in 2023. The breeding herd inventory is down 2% from a year ago but the reduction has been more than offset by productivity gains.
Highlights
- The quarterly survey of hog operations suggests that pork supply in 2024 will be modestly higher than in 2023. The breeding herd inventory is down 2% from a year ago but the reduction has been more than offset by productivity gains.
- Futures markets largely ignored the report, establishing life of contract highs by the end of the week. Demand has been far stronger than most expected, resulting in steady gains for late spring and summer.
- There is also speculation that consumers may be trading down, which tends to support lower priced protein options like pork. Pork prices at retail have increased at a far lower pace than beef and chicken, making it more competitive.
- Ham prices surged higher after Easter, in part due to the reduction in slaughter during the holidays but also two weeks of big export sales (55k MT) to Mexico.
- Trim prices firm and expected to move higher in May/June.
Full Report
Hog futures last week largely ignored the implications of the latest Hogs and Pigs survey. The results came in on the high end of estimates in most categories but, for now, market participants are instead focusing on near term demand. The bet is that demand in domestic and export markets will hold up in the spring and summer and more than offset the expected increase in supply implied by the latest survey. After all, pork supplies have been higher than expected for much of Q1 and yet hog/pork prices have proved to be quite resilient. Also, in the past the market has not traded quarterly report numbers, or at least not to the degree that it trades some grain reports like the quarterly stocks or planting intentions. Still, it is important to note the latest survey as it gives the best baseline available for supply forecasts in the next 12 months.
Will there be more or fewer hogs than a year ago this summer?
The USDA survey says more. The Dec-Feb pig crop roughly corresponds to hogs coming to market Jun-Aug. Analysts were expecting a 1.3% increase vs. a 1.9% increase in the USDA March survey. The Dec-Feb pig crop increase is higher than the increase market hog inventory numbers. This would imply that supply this summer may be a bit larger than many expect. USDA has made significant upward revisions to the supply from previous quarters, so the higher supply for the summer should not come as a surprise.
More hogs from a smaller herd, what gives?
In the last six months there has been a lot of talk/focus on the breeding herd, especially following announcements last year about major suppliers closing sow farms. Farrowings data confirmed what the December herd data suggested, with the survey data showing Dec-Feb farrowings 2.6% lower thana year ago. It’s always good to check farrowings relative to the breeding herd. The ratio to the Dec. 1 breeding herd at 47.9% is a bit higher than last year but consistent with recent trend and still under pre-COVID levels. But even with the lower-than-expected farrowings, the pig crop ended up being higher. The reason is the higher productivity we have experienced the last few months compared to 2020-2022. Pigs per litter in the quarter jumped 4.6% y/y. Analysts were expecting 3.3% increase, which we noted in our pre-report review as being low considering previous quarters. Even at +4.6% pigs per litter were slightly under pre-COVID trend. The chart above shows that Dec-Feb pigs per litter tend to be lower than during Sep-Nov. The q/q decline was not as big as the last two years but it does not appear out of line with those pre-COVID years.
Fall supply could be slightly above year ago.
Mar-May farrowing intentions were down 0.9% but the current trend in pigs per litter could more than offset that.
Pork Exports were Robust in February, with Strong Mexico Demand Helping Offset Weaker Sales to Asia
Exports of fresh, frozen and cooked pork in February were 201,089 MT, 29,335 MT (+17%) higher than a year ago. Shipments to Mexico were up 15,102 MT, a 23% increase from a year ago. Shipments to several other markets registered strong growth. Exports to South Korea were up 68% and exports to Australia increased 152%. That growth helped offset the lower exports to Japan (-2.8%) as well as lower exports to China (-31%) and the Philippines (-26%). Robust sales to Mexico in March are likely to keep pork export shipment volume above year ago levels. However, outstanding pork export sales are currently running under year ago levels. This may curtail export potential in late spring and summer.
Price Chart
Forecasts
Steiner Consulting Group produces the National Pork Board newsletter based on information we believe is accurate and reliable. However neither NPB nor Steiner and Company warrants or guarantees the accuracy of or accepts any liability for the data, opinions or recommendations expressed.
