Pork production isn’t for the faint of heart. U.S. pig farmers are facing an increasingly challenging economic environment that is likely to persist through the remainder of 2023, according to the latest CoBank’s Knowledge Exchange report.
Persistently high operating costs combined with depressed hog values are destroying producer returns and limiting overall industry growth. Although it’s true hog prices have risen this summer, they have not kept pace with skyrocketing costs for feed, labor, construction and other expenses, the report notes.
Market challenges are compounded by soft domestic demand for pork and a murky outlook for U.S. pork exports. Meanwhile, persistently high retail pork prices and a decline in food-at-home spending in the U.S. are limiting domestic consumption growth. Worldwide demand for U.S. pork has come under pressure as China’s hog supplies have rebounded from the outbreak of African swine fever (ASF). The totality of adverse market conditions, which include higher borrowing costs, will limit U.S. herd expansion and tighten hog supplies, the report says.
“Ultimately, these challenges all fall on the shoulders of pork producers,” Brian Earnest, lead animal protein economist for CoBank, says in a release. “In addition to pressuring hog and pork supplies, the current market conditions are derailing hog producers’ expansion plans. And even if the cost structure warranted additional production, demand is a part of the puzzle that needs addressing.”
Stale Per Capita Consumption
Per capita U.S. pork consumption has remained essentially flat since 1990 and averaged 50 lb. annually over the last decade. Chicken consumption, on the other hand, nearly doubled from 57 lb. in 1987 to 102 lb. in 2022.
“Roughly two-thirds of domestic pork winds up in processed items like bacon, sausage or hams, which have performed relatively well in recent years. However, key meat case items like pork loins are struggling to gain the same attraction that boneless skinless breast meat or ground beef enjoy,” the report explains.
Approximately 25% of U.S. pork is going to export markets, the most of any of the U.S. processed animal proteins. When ASF decimated China’s domestic hog herd in 2018, annual U.S. pork exports to China tripled in 2019, and then doubled the following year, CoBank’s Knowledge Exchange notes. Since then, China’s need for U.S. pork imports have rapidly declined as its domestic herd rebounded.
Mexico has been a bright spot for U.S. pork with exports reaching 2.3 billion pounds in 2022, a record high for any single destination that accounted for about 37% of all U.S. pork exports. Today’s export volume to Mexico represents a 45% jump from 2016 levels. Still, uncertainty surrounding China clouds the outlook for U.S. exports.
“Some of the challenges facing pork producers will linger for the foreseeable future,” Earnest said in a release. “But longer term, if retail pork prices begin to return to a normal level it should help domestic demand recover. Also, the popularity of backyard barbecuing has encouraged consumption of some cuts of pork that have historically struggled, which has been helpful in an otherwise difficult situation.”
