Will Consumer Demand Drive Strong Pork Prices in 2023?
Consumer demand in the U.S. has been a key driver of strong pork and hog prices, but will it remain that way in 2023?
Although 2023 is off to a solid start, Steve Meyer, an economist with Partners for Production Agriculture, pointed out that demand is difficult to predict during a session at the Ohio Pork Congress. To top that off, production costs have entered a new era and likely are not going back, African swine fever continues to be a risk when it is so close to the U.S., breeding intentions are flat and operational packing capacity is still a challenge, he said.
Proposition 12 remains a factor, too, as the industry awaits a decision from SCOTUS.
“Regardless of what happens with Prop 12, some customers will demand it. I think we will deal with in in the marketplace even if we don’t have to deal with it in the legal issues,” Meyer said.
6 Key Factors to Consider in 2023
When it comes to the 2023 outlook, Meyer shared six key factors to consider when it comes to demand.
1. Exports were difficult and a drag on 2022 wholesale and hog demands, with the exception of Mexico, South Korea and the Dominican Republic.
2. Look for 3% to 5% growth in 2023 exports primarily due to Japan, South Korea and Latin America.
3. Domestic demand is still strong but slipping a bit from record level.
4. Relative prices do not point to one species driving demand, yet.
5. Macro variables are strong, with the exception of equity wealth and inflation. Employment is growing. Work force participation is still low but rising.
6. The problem is inflation and its drag on real income levels.
What Does This Mean for the Future?
In the next 3-5 years, Meyer said three big concerns remain: the threat of foreign animal disease, long-term labor for packers and producers, and physical capacity growth.
“There’s no certain addition to capacity in 2023 and it’s going to be tight on hog numbers getting out there,” Meyer said.
He expects modest growth of less than 1% per year in the sow herd until there is a known increase in capacity. At the same time, he projects a return to 1% to 1.5% per year growth in litter size and some decline in aggregate litters/breeding animal.
“This is mainly built on assumption that we have Prop 12 in effect. If we have Prop 12 farms without breeding stalls, the hit is going to be on farrowing rates. That will reduce aggregate litters per sow. If Prop 12 goes aside, I don’t think we’re going to have some real challenges here,” Meyer explained.
In addition, he forecasts slow growth for exports, primarily because of China. But he points out that there is a great opportunity in Central America, South America and the Caribbean if free trade agreements become fully implemented with no tariffs and no quotas in a population that is about equal to Mexico.
“I don’t think we’ll be in a +10% or +20% world anymore; we’re going to be very happy with 3% to 5% growth in exports this year,” he said.
Domestic demand is softer at present and this year will be key.
“We saw something dramatic change in 2020,” Meyer said. “I think a lot of consumers discovered a frying pan in the cabinet that they had never used before, so we had this big shift from food service to home cooking. We had some things in place to help them with that – Pork Board’s programs, social media and those kinds of things that were a big help. Is that lasting? That’s a question we’re all asking at the present time.”
More from Farm Journal's PORK:
Here’s Why Pork Producers Are Reluctant to Expand
Variety Meats: Unsung Hero of U.S. Pork Exports in 2022
U.S. Exports to Dominican Republic Reach Record-High; Pork Leads Way
U.S. Pork Trade Value: $61.26 Added to the Value of Each Hog Marketed
