Porkonomics: An Economic Outlook for the Pork Industry

Dr. Steve Meyer, Lead Economist, Partners for Production Agriculture and Dr. Lee Schulz, Associate Professor, Iowa State University provided an economic outlook for the pork industry during the Pork Academy Sessions at the World Pork Expo.

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Market Demand Takeaways

Demand for pork is influenced by various factors, including the prices of competing goods, consumers’ income levels, and exports. The income of consumers plays a crucial role in shaping purchasing patterns. The distribution of stimulus payments during the COVID-19 pandemic resulted in increased disposable income for many individuals. It is important to recognize that consumer sentiment has softened since 2022, largely attributed to lower income levels. These shifts in purchasing power have significant implications for the pork industry.

Hog Supply Key Takeaways

Currently, the U.S. hog cycle looks different than it has in the past. Biological lags, asset fixity, and asset specificity contribute to these differences. Hog slaughter rates have risen year-to-date, yet breeding herd utilization is at its lowest since 2015. To adapt to the market conditions, producers are expected to revise the breeding herd and reduce the number of breeding animals. Consequently, economists predict a decrease in lean hog prices in late 2023, with an eventual recovery and price increase projected for 2024.

Challenges and Concerns

One unfortunate reality facing the industry is that hogs can be purchased at lower prices than they can be produced for, posing a significant challenge to producers. Additionally, there are both short-term and long-term concerns that warrant attention.

In the short term, market volatility could lead to a reduction in sow herds nationwide, potentially impacting future demand once the market stabilizes.

In the long term, challenges include keeping Foreign Animal Diseases (FADs) out of the U.S., ensuring a stable labor supply, managing physical capacity growth resulting from mergers, and reevaluating price determination mechanisms.

To watch more sessions from the 2023 Pork Academy Sessions, click here.