“The key to maximizing profits in the swine industry lies in the mantra of ‘More market hogs, fewer breeding animals’, as this strategic approach ensures higher productivity, increased efficiency, and ultimately, a healthier bottom line.”
The pork industry is facing various challenges that are impacting producer returns in 2023. Factors such as elevated input costs, weak consumer demand, and animal welfare regulations have contributed to lower average prices for live equivalent 51-52% lean hogs from January to August. According to Iowa State University’s Estimated Livestock Returns, it is unlikely that break-even costs will be covered until the spring of 2024.
The September Quarterly Hogs and Pigs Report revealed an increase in market hogs and a decrease in breeding animals. This trend is attributed to producers’ efforts to keep pig numbers below last year’s levels. However, the decrease in cases of porcine reproductive and respiratory syndrome at key points in the year offset these efforts.
Steady-to-larger pig crops have also resulted in an increased supply of market-ready hogs. This has led to prices trading below production costs. In both the March-May and June-August quarters, lower farrowings resulted in pig crops measuring 101% and 100% of those from the previous year. Higher litter rates in these periods further amplified the increase in pig crops.
Fourth-quarter pork production is expected to be nearly 4% higher than the previous year, resulting in reduced prices. Live equivalent 51-52% lean hogs are projected to average $58 per cwt, which is almost 9% below the fourth quarter of the previous year and below break-even prices for most U.S. pork producers. However, first-quarter hog prices are expected to be higher, driven by increased competitiveness of pork in the domestic market and growing foreign demand for U.S. pork.
The September Hogs and Pigs report indicated that producers intend to farrow 5% fewer sows in the September-November 2023 quarter compared to the previous year. If producers follow through with these intentions, pork production in the second quarter of 2024 is expected to be slightly smaller than the previous year, leading to higher hog prices.
Looking ahead to 2024, pork production is forecasted to increase by 2.2% compared to the previous year. Larger production is expected to pressure hog prices to $65 per cwt, which is more than 6.2% lower than third-quarter prices in 2023. Despite the decline in prices, exports are expected to make headway. U.S. pork exports in August 2023 were 2.6% higher than the previous year, with shipments to Mexico accounting for 40% of total exports. However, exports to Asia, apart from Japan, were generally weak.
The reduction in European Union (EU) pork production and exports may explain the weaker demand for U.S. pork in certain markets. The EU has been reducing its pork production and exports due to high production costs, increased energy costs, and new animal welfare rules. These factors have led to smaller exportable pork surpluses.
In summary, the pork industry is facing challenges related to input costs, consumer demand, and regulations. While producer returns have been impacted in 2023, there are expectations of higher hog prices in the first and second quarters of 2024. Additionally, U.S. pork exports are anticipated to increase, although certain factors, such as the EU’s reduction in production and exports, may impact demand in certain markets.