In 2024, the pork industry learned many valuable lessons. For Brian Earnest, lead economist, animal protein at CoBank, one of the biggest lessons learned was that patience and persistence pay off — sometimes.
“Often, luck prevails,” Earnest points out. “Price remains foremost in the decision-making criteria of the consumer. Continue to execute on producing a high-quality economical option, advance innovation throughout the value chain and match up production with market needs.”
Even when times are tough, economic theory says to maintain full production, at least in the short run, as long as expected revenues are projected to cover variable costs. Lee Schulz, chief economist at Ever.Ag, reminds producers that any returns above variable costs would leave something to apply toward fixed costs.
“This was a hard lesson learned in 2023 and the early parts of 2024,” Schulz says. “However, staying the course allowed producers to capture profits when favorable conditions returned in 2024.”
Altin Kalo, chief economist at Steiner Consulting, says July 2024 lean hog futures started the year priced at around $90 per cwt, which was an OK but not great price. By late March, futures had surged to $110 per cwt, a great price by most measures. The contract settled under $90 per cwt.
“Volatility is a fact of life in this business,” Kalo emphasizes. “Staying on an even keel works well for sailors and pork producers alike.”
Earnest, Kalo and Schulz join Dave Weaber, senior animal protein analyst with Terrain, and Christine McCracken, senior animal protein analyst at Rabobank for a look at the 2025 pork outlook.
Q: What will be the main differences as you look toward the 2025 outlook as compared to 2024?
Earnest: The prior 12 months were more of a transition phase, both from a supply and demand standpoint. Lingering effects of pandemic-influenced consumer purchase behavior have continued to fade, and we’re now in a period where consumers are likely to focus on stretching their dollar. This could be good and bad for pork. Bacon is the most frequently consumed pork item. Bacon performed well in 2024. While it does fine on its own, as an add-on, sales performance is likely to slump in a budget-conscious consumer environment.
Kalo: Feed cost structure is likely to be very different, which will directly impact operating costs. The political environment, on the other hand, is likely to be just as uncertain. Elections are behind us, but we do not know how some of the policies of the incoming administration will impact the economy. Are tariff threats simply a way to gain more leverage in negotiations? Or will they be implemented and result in a tit for tat response from our trading partners? There is currently a lot of appetite for risk on the part of speculators, reflected in the highest net long position on record. One should always worry about the pendulum swinging too far and then the sudden and painful reversal.
McCracken: As we move into 2025, the pork industry is in a much stronger financial position than a year ago, though balance sheets have not fully healed. This recovery is due to both reduced production and a rebound in pork demand in both domestic and export markets. The stronger U.S. economy is a factor, but record beef prices and a renewed interest in nutrient-dense foods are also contributing to the strength. Despite the positive outlook, there are numerous potential market disruptors. U.S. pork exports face more challenges than a year ago, with a stronger U.S. dollar, slowing economic trends in key Asian markets and potential tariff actions threatening a significant value driver for the U.S. pork industry.
Schulz: The forward curve. At this time last year, a loss of $23 per head was forecast for 2024. That was derived using lean hog, corn and soybean meal futures prices to represent the market’s expectations at the time and the parameters from the Iowa State University Estimated Returns Model for farrow to finish production. Using that same approach again this year forecasts a profit of $12 per head in 2025. Producers should consider all tools and strategies available to accomplish price risk management objectives and take advantage of current and future market opportunities.
Weaber: Many are concerned that the pork export business could be on a roller coaster of potential trade restricting tariff threats and actions. While that was the case several years ago, price reactions and export opportunities might be different this time around. This will bring further focus to the domestic market’s need for continued meat quality improvement and demand growth.
Q. What is your 2025 outlook for the pork industry?
Earnest: Predicting supply changes remains a daunting task, as the breeding herd has been locked in contraction mode since 2019, but productivity continues to grow. Then again, harvest-ready hog volumes have been below survey-implied levels. Ultimately, the industry continues to leverage genetics and technology, harnessing efficiencies. We expect supply to moderate at current levels, with any potential gains in pork production stemming from weights climbing.
Kalo: The outlook is positive. Producers struggled with negative margins in late 2022 and much of 2023. They were forced to make some painful decisions, reflected in the smaller size of the breeding herd, down 135,000 head year over year on Sept. 1 and likely to be down year over year on Dec. 1. The result has been a more balanced pork supply while overall demand has improved compared to earlier in the year. Robust economic growth should help sustain demand in 2025 while pork supply, at least through the first half of the year, is likely to be lower than in 2024. Lower feed costs will help get margins in the black for much of the year.
McCracken: The U.S. pork industry is positioned for a strong year of profitability tied to limited supply growth, manageable feed costs and relatively healthy domestic demand. However, there are still a few unknowns given a new administration, particularly regarding trade and labor. Additionally, herd health remains a challenge for some producers, and the debate over the disconnect between the current supplies and government estimates is likely to continue into the new year.
Schulz: Returns to farrow to finish production are projected to average a loss of $1 per head in 2024 according to the Iowa State University Estimated Livestock Returns Model. An average annual profit of $12 per head is forecast for 2025. If realized, the 2023 to 2024 to 2025 stretch will go down as one of the quickest turnarounds in pork producer profitability ever. However, this says more about the abysmal situation in 2023, where producers averaged a loss of $32 per head, than it does about recent profit levels. Furthermore, there is still a lot of financial healing that needs to take place before any meaningful expansion comes into focus.
Weaber: I expect market hog prices for the year to average 1.5% to 3% higher than 2024’s in the $88 to $89 per cwt range (National All Barrow and Gilt Net Weighted Average). I expect that hog slaughter levels for the year could be near even, down 0.5% to 1.5% during the first half of 2025 and up 0.5% to 1.5% in the second half. Carcass weights are expected to “normalize” near five-year average levels (omitting 2020 COVID-19 impacts). This trend likely adds to pork production levels most significantly during January through May 2025 versus a year earlier as lower feed costs incentivize adding more pounds before hogs are marketed.
Q. What do you predict will be the biggest obstacles surrounding profitability in 2025?
Earnest: An onset of a low-feed-cost environment traditionally stimulates interest in growing animal units across major categories. However, uncertainty looms around demand, and capital costs remain elevated suggesting an expectation for no more than moderate growth in the hog sector. Despite challenges both in domestic and foreign demand, the U.S. is likely to have overtaken the European Union (EU) as the leading pork exporter during 2024.
Kalo: There are always risks/obstacles in this business. Right now, there is talk of more disease pressure in some areas. We don’t know how widespread that is, but it’s an issue for some producers. Then, there is trade policy and the threat of tariffs on Mexico and Canada. These two countries this year have bought 45% of all our exports. If they decide to respond to our tariffs by imposing tariffs on U.S. pork, then it could depress pork prices in the U.S. and impact producer margins.
McCracken: The most significant challenges in 2025 are likely beyond the industry’s control, as the incoming administration has promised immediate action on trade and immigration. Although not directly targeted, pork exports could again be a target for retaliatory tariffs. U.S. pork and variety meat exports are a critical value driver for the industry, accounting for one-third of total carcass value. Among the top markets and at the top of the list of trade targets, Mexico and Canada rank in the top five, representing 30% and 9% of pork export value, respectively. Trade with China, our third-largest pork export market by value and another target for U.S. tariffs, is also at risk of incremental retaliatory action. While a separate discussion, the immigration debate and future availability of workers is another concern. With rural labor availability already tight and wages high, any disruption could pose significant challenges.
Schulz: What the past couple of years have taught us is profitability isn’t as much about price as it is about margin, or revenue minus costs. On average, 2024 production costs were 12% lower than in 2023. However, that cost level was still 34% higher than in 2020. Though costs in 2025 are forecast to decline 5% from 2024’s still elevated level, they will remain a headwind to profitability. With that said, revenue and specifically hog prices seemingly have the biggest possible variance in 2025. For instance, changes in U.S. trade policy, particularly if they provoke retaliatory tariffs, could have a major impact. A tariff put on U.S. pork exports is a tax that raises the price of U.S. pork for the importing country. The impact is lower U.S. hog prices and higher pork prices in the importing country. The impact of the 2018 trade disruptions was an estimated 12% decline in U.S. hog prices.
Weaber: I see the biggest obstacles coming from the supply side. The continued growth in sow productivity/pigs per litter is likely to produce a 1% to 2% larger pig crop with a stable year-over-year sow herd. Recent farrow-to-finish profits, though small, resulted in a complete halt to sow herd liquidation because they were still better relative to the previous 18 months of losses. The potential for sow herd expansion is a headwind that could add further pigs to the market inventory, hog slaughter and pork production numbers and stall the recovery of prices and profitability in the last three quarters of 2025.
Another risk is the resurgence of La Niña and return to drought conditions across large portions of the southern U.S. If feed prices rise modestly to sharply higher, they would erase the major driver of the return to profitability during late-2024 and early 2025. Acreage decisions for 2025 will crystallize in advance of the USDA’s March Prospective Plantings report as spring prices help drive acreage decisions.
Demand side risks include a strong dollar, limiting export opportunities and the incoming U.S. administration’s considerations on using tariffs as a negotiating tool to drive international relations and policy goals. Canada, Mexico and China are currently the leading countries being threatened by tariff tactics, and they are major pork trade partners.
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