With the U.S. breeding herd down 6.2 million head below year-ago levels (according to USDA’s September Hogs and Pigs report), producers are remaining cautious about expansion, Rabobank says in Global Pork Quarterly Q4 2022.
“This decline reflects a previously announced West Coast plant closure and the lower ROI on planned expansion,” says lead author on the report Christine McCracken, executive director and senior animal protein analyst at Rabobank.
Other reasons for caution include elevated feed and energy costs and an uncertain regulatory environment. In addition, challenging herd health and higher sow mortality also play a role, the report notes.
Rabobank continues to expect a stabilization in the sow herd and a modest uptick in growth in 2023, although experts are not expecting any significant expansion before 2024/25.
Carcass values continue to struggle, despite being well ahead of historic averages.
• U.S. pork values were above expectations in Q3 and are expected to remain strong through year-end on steady demand and tighter availability (YTD production -2.3% YOY).
• Ham demand in domestic and export markets is expected to remain strong (prices +14% YOY) on reduced domestic turkey availability (lower due to recent HPAI outbreaks), which should support prices.
• Lower belly prices (-38% YOY) should improve retail bacon prices, further supporting carcass values through year-end.
• According to IRI, September fresh pork sales at retail were down 1.4% YOY, with better prices offsetting a 1.7% year-over-year decline in volume.
“We expect increased seasonal production and promotions for National Pork Month to boost volumes but expect increased competition at retail from low-cost chicken,” McCracken writes. “Average packer margins (USD 17/head) have improved on the recent drop in hog prices, yet they remain below the long-term average.”
Analysts say exports are still under pressure as prices remain uncompetitive. Pork exports were down 3.4% in volume in August but up 2.4% in value.
Analysts attribute this to steady volumes to Mexico, along with a jump in shipments to China/Hong Kong and South Korea, which offset weaker exports to Japan and Canada. Import volumes remain steady, with Canada supplying two-thirds of the volume, the report said.
Rising Uncertainties Around Consumption and Trade Weigh on Producers’ Minds
