For two weeks in a row U.S. hog slaughter has been below a year ago (-1%). Our expectation has been sow reduction began in earnest last May. If correct the results of liquidation should begin to show up about now in market hog numbers.
Year to date U.S. hog slaughter up 0.8% while pork production up 0.5% (carcasses have been lighter).
We continue to believe USDA projection that the U.S. will produce 600 million more lbs. of pork in 2024, than 2023 as being off the mark. USDA 2023 at 27,301 million lbs. and projects 2024 at 27,910 million lbs. (+2.4%). Year to date actual 0.5%.
The unfortunate part of USDA over estimation in our opinion is what it does to restrain Hog futures from reaching the prices they will actually be in the months of actual marketing. Several people have said to us your opinion of less hogs in 2024 is contrary to USDA projection. Fair observation. Time will tell if the USDA with their vast array of experts is correct or is a pig guy.
Iowa State University has for decades has done a calculation of farrow to finish costs and returns. In 2023 it indicated an average loss of $32 per head. The highest annual loss ever (The USDA actually projects we expanded production?). So far in 2024 Iowa State calculated industry loss $41.08 in January, $24.25 loss in February. February breakeven 88.84¢ lb. lean. Hog Futures May until October are now averaging well over breakeven. On the Friday close May 93, June 102, July 103, August 103, October 87. Looks like some profit. Still a long way to backfill the losses had over the last 18 plus months. We still believe hog prices will exceed all these future months current pricing as hog slaughter declines coupled with ever lower beef production.
Last year U.S. Beef Production was 26.963 million lbs. down from 2022’s 28.291 million lbs. (-1.3 million lbs. -5%). On this 5% lower a year ago this year to date beef production is down -4.3%. If correct U.S. beef production could be down 2.5 million lbs. or about 10% in 2024 compared to 2022. It’s the equivalent of about 5 weeks of hog slaughter disappearing.
U.S. sow slaughter continues to run at high levels. Latest week 66,388. Sow slaughter numbers are being affected by new sow slaughter facilities in Western Canada. In the past those came to U.S. sow herd and were in sow slaughter totals. We expect that U.S. sow herd will be down about 100,000 on March 1 USDA report compared to December 1. Less sows obviously less pigs. If correct sow herd at 5.9 million down from 6.252 million June 1, 2022 (-350,000). We didn’t get smaller because of profit taking.
Last week Tyson Foods announced the closure of their Perry, Iowa hog slaughter facility. Over 1,000 employees affected. We understand Tyson will endeavour to push the about 8,000 hogs a day to other Tyson facilities in Iowa – Nebraska. A sign of the times with Packers having not so good margins and the need to push all plants to efficient capacity.
Patrick Fleming of Midan Marketing wrote an excellent article on pork quality. Link: midanmarketing.com
