U.S. pork productivity has been fantastic with producers raising more pigs while farrowing fewer sows. In addition, there has been less disease pressure. Fortunately or unfortunately, that means we have a lot of barns that are really full, says economist Christine McCracken.

And that’s crushing the pork market right now.

With zero or negative margins for multiple quarters in a row, AgriTalk host Chip Flory asked McCracken if she thought sow liquidation was over yet.

“We think this will continue into 2024,” McCracken, senior analyst for animal protein at Rabobank, told Chip Flory on AgriTalk. “It’s a really long process. You can’t turn a ship this big overnight.”

She believes glimmers of hope such as a good run on pork prices earlier this summer and optimism around this fall’s crop gave producers a little breath of fresh air. But she’s concerned about the lack of visibility about what’s happening right now – especially in regard to soybean meal.

Is Inflation Still a Headwind for the Pork Industry?

McCracken said inflation is an ongoing headwind for the industry.

“If you look at pork prices on the store shelf, the reality is that we just haven’t seen them come down much. They’re using pork and chicken to offset some of those really high beef prices. If you look at wholesale pork costs, for example, bellies are down 20%,” McCracken pointed out. “I don’t know about in your area, but I’m not seeing that kind of drop in bacon prices.”

This points to the resiliency of the consumer, Flory brought up. How soon will the affordability issue catch up with consumers?

“Just look at rent, look at what we’re paying for our cars. I think that it’s all going to catch up with the consumer. We do think things could slow down a bit after the holiday bills come due,” McCracken said. “But, I’ve been surprised so far. We’re still moving a lot of meat and sales volumes continue to beat my expectations.”

What Will Shake Out in 2024?

Experts believe the start of 2024 will be rough.

“The reality is that no one will make a lot of money early in the year. But we’re still moving the product. Inventory isn’t building up, which is great news,” she said.

The Proposition 12 impact will be interesting to watch, McCracken told Flory.

“We think about what happens when the rules are actively enforced at the end of the year, as it could slow sales into California. We’re already seeing that now,” she said. “I think exports are watching to see what will happen with recent weakness in the U.S. dollar making pork more affordable in some markets.”

Although there is good news ahead, she is the first to admit it’s going to be tough start to the new year.

“Productivity numbers are a blessing and a curse. It’s a lot easier to deal with a healthy herd and some really strong productivity,” McCracken said. “It’s a good sustainability story, though, when we think about what we are able to produce on a smaller herd using fewer resources. I am still really optimistic on the industry outlook long-term. We just need to make sure we manage through the short-term cycle.”

Read more:

Breeding Herd Reductions and Slow Trade Impact 2023 Global Pork Prospects, Rabobank Reports

Pork Producers Navigate Challenges With Record Productivity, Rabobank Report Reveals