“Things are looking better, but not good,” Ever.Ag chief livestock economist Steve Meyer said about the pork outlook during a presentation at the Illinois Pork Expo on Jan. 30. “The question is, will things get better enough to get you in the black?”
Input costs are lower and may get lower still, wholesale demand has strengthened, consumer-level demand has recovered some and herd health has improved sharply, he pointed out. Although improved herd health is great news for impacted operations, he said it’s not-so-great news for the hog market.
“Restoring profitability will require lower costs and/or higher demand and/or lower pork supplies to push prices up,” Meyer said.
What Might Be Possible?
Demand reached a record high in 2021, followed by another new record in 2022, he said. However, demand started to decline in October 2022, leading into a rough first half of 2023. Fortunately, the second half of 2023 was much better.
“The demand surge and fall was very correlated to real income level – driven by stimulus money,” Meyer said. “As we go into 2024, the amount of product we will offer consumers will be going down.”
He expects pork per capita consumption to fall to just under 50 lb. in 2024.
“We normally are between 50-52 lb. per capita consumption. Is just under 50 lb. good? No, I’d like to be growing it. But, is it bad? No, it could be beef and going down,” he said.
Where Would We Be Without Mexico?
Mexico has clearly been the savior for U.S. pork exports in 2023. Mexico will remain strong for U.S. pork but there is caution, he pointed out. He believes pork from Santa Catarina, Brazil could make some inroads.
“I don’t think we can hang any hope on China rescuing our exports,” Meyer said. “China’s imports were expected to increase in 2023, but they were actually lower versus 2022 – and hogs/pork are cheap in China now.”
He notes the U.S. still has a 25% punitive tariff creating challenges with trade to China. Plus, political tensions remain roadblocks for the U.S.
“China buying from anyone would still create opportunities for U.S. exports to other markets,” he said.
As well, big European Union output reductions and much higher prices will help the U.S. – especially exporting to Japan and Korea and other southeast Asia countries.
Supplies Keep Moving Up
“If you need to reduce supplies, what happens when litter size keeps going up year over year?” Meyer asked, referring to the latest data in the USDA’s Hogs and Pigs Report. “You’re going to have to make some dramatic cuts to your breeding herd.”
Sow slaughter was high in the summer of 2023, but dropped down last December.
“We haven’t reduced the sow herd much,” Meyer explained. “Sow slaughter as a percentage of breeding herd is a more telling number of actual sow slaughter. We are now below 1%, so I would argue we aren’t reducing the sow herd at this time, and we aren’t reducing litter size.”
He added that hog slaughter has experienced some big disruptions lately due to weather, but total slaughter since Dec. 1 is still within 0.2% of his forecasts, Dec. 1 through Jan. 26.
What Does This Mean for Producers?
Although there are a number of things pointing to profit, he said they are yet to materialize.
“It’s a good time to play defense,” he said. Take advantage of opportunities to manage risk. Meyer offered six final thoughts for pork producers to consider.
1. Costs are falling but amount will be limited – mid $80s, maybe a bit lower.
2. Consumer-level demand will remain below 2021-2022 levels, but stay at pre-2021 levels – which were not bad versus history.
3. Exports will end up +6% to +7% in ’23 and +4% to +5% in 2024.
4. Wholesale pork prices will be above, but close, to their 2023 levels in 2024.
5. The breeding herd will eventually shrink. How much can our market handle?
6. Productivity gains will keep 2024 pig and pork supplies very near 2023 levels.
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