Pork supply has recovered, with slaughter over 2.6M consistently in the last four weeks. Since December 1 slaughter is up by more than 3% y/y, double the rate of increase indicated by the inventory survey.
Highlights
- Pork supply has recovered, with slaughter over 2.6M consistently in the last four weeks. Since December 1 slaughter is up by more than 3% y/y, double the rate of increase indicated by the inventory survey.
- The increase in slaughter has helped moderate prices across a range of products. Belly prices are down 30 cents from their peak three weeks ago and pork trim prices are also moving lower, with fat pork trim seeing the biggest declines.
- Ham prices should see some support in the coming weeks as processors ramp up production ahead of Easter and hog slaughter drops under 2.6M per week. Because of the early Easter this year, we think ham prices are likely to peak at the end of February.
- Loin prices trading sideways in the near term while spareribs remain in short supply and trending higher.
Full Report
USDA recently updated its projections for pork supply and demand in 2024, summarized in the chart below. What stands out at first look is how stable the USDA projection of domestic supply availability has been. Even more so, the supply available to US consumers has been hovering around 50 pounds per person for much of the last 20 years. The only big change was during 2011-2014, years when record corn prices and the spread of PEDv virus significantly impacted the ability of producers to bring product to market.
In its latest update, USDA is projecting pork production for 2024 to be 27.895 billion pounds, revised down from what was presented in January but still about 579 million pounds (+2.1%) higher than in 2023. One thing to note is that there are two additional slaughter days in Q3 and Q4 of 2024, which will tend to skew the production figures. Also, USDA does not make any guesses as to what the productivity levels will be, it tends to follow current trends and update their forecast when the trend changes. USDA revised higher its forecast for pork exports in 2024 to 7.080 billion pounds, 3.8% higher than a year ago. Overall, per capita availability in 2024 is expected to be 1% higher than in 2023.
Key takeaway for U.S. retailers and foodservice operators: While pork producer margins were significantly impacted in 2023, in the near-term pork supply is expected to remain stable. That’s because reductions in the breeding herd so far have been offset by gains in productivity. Does the fact that U.S. pork supply is expected to be above year ago levels in 2024 imply that overall pork prices will be lower? How about the price of specific items, such as loins, hams and bellies?
The chart above shows the value of the pork cutout (wholesale price index) in 2023. One thing that stands out is that pork prices in Q2 of 2023 were unusually low, something that market participants do not expect to be repeated this year or in 2025. Large inventories in the spring and the Supreme Court decision about the California and Massachusetts animal welfare rules caused significant disruptions to the spot market in 2023. That is not expected to be repeated in 2024. A big reason for the lower prices in 2023 was the fact that the belly primal value in April and May was near $70/cwt. Currently cutout futures imply belly values that are more in the $120-$125 range. So even as estimates imply a stable pork supply base, it is important to put the y/y price comparisons in context, especially when comparing to outliers.
Hog Slaughter/Pork Production Running Above Year Ago Levels
Last week hog slaughter was 2.622 million head, 6% higher than the previous year. In the four weeks ending February 10 slaughter has been a total of 466k head (+4.6%) higher than the previous year. Some of this is due to the disruptions caused by winter weather in mid January. Remember that for the week ending January 13 hog slaughter was 518k head smaller than the comparable week in 2023. Overall, however, it appears that there are more hogs on the ground than what the USDA inventory suggested. Seasonally hog slaughter declines in Feb/Mar/Apr. We think this week slaughter will be 2.56-2.58 million head.
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.
