The first 7 months of 2017 were characterized by year-over-year higher pork demand. Consumers demanded higher quantities of pork for which they were willing to pay higher prices.
January-July 2017 federally inspected pork production was almost 3% greater than the same period in 2016. January-July federally inspected hog slaughter was more than 3% above the same period of a year earlier, and January-July prices of live equivalent 51-52% lean hogs averaged more than 5% above January-July 2016.
The figure below shows wholesale pork carcass values for 2016 and 2017. Between January and July 2017, the value of the pork carcass increased from $80.56 per cwt to $103.25 per cwt, with the belly portion of the carcass accounting for more than half of the increased value.
Since the peak of both the value of the belly primal and hog prices in late July, the value of the hog carcass decreased by almost $26 per cwt from July-September, with almost two-thirds of the decline attributable to the belly primal. Between late July and late September, hog prices fell by almost 42%.
In the first full week of September, two new packing facilities opened in Michigan and Iowa. Each began the month with daily slaughters rates of about 1,000 head per day. By the first week of October, each plant had reached kill levels of about 4,000 head per day. Estimated federally inspected slaughter in September was 10.2 million head, more than 6% above a year earlier, even with one less slaughter day in September 2017. While carcass values continued to slide in September, the rate of decline slowed. The wholesale pork carcass cutout ended the month valued at only 2% below September 2016. Hog prices finished September slightly above prices a year earlier.
It is anticipated that the record-high fourth-quarter pork production forecast—just over 7 billion lbs.—will be consumed both domestically and abroad. More than 1.5 billion lbs. of pork is expected to be exported in the fourth quarter, or 22% of production, compared with 21.9% a year ago.
Estimated fourth-quarter disappearance of 13.9 lbs. per capita anticipates an increased availability of 0.4 lb. per capita, compared with fourth quarter 2016. Average prices of live equivalent 51-52% lean hogs are expected to be $38-$40 per cwt, more than 5% above a year ago. Higher year-over-year prices in an environment characterized by higher hog numbers and more slaughter capacity imply that processors are currently bidding more aggressively for hogs than was necessary a year ago, likely the result of the increase in slaughter capacity.
Editor's Note: Mildred Haley is an analyst with the U.S. Department of Agriculture's Economic Research Service.