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  • There has been little movement in the pork market as supply continues to outpace earlier estimates and market participants are now pricing a much weaker demand environment for the summer.
  • Per capita supply in the domestic market is currently forecast to be near the highest level in a decade, rivaling the supply levels in 2019.
  • It is important to recognize that significant demand weakness for some items is having an outsize impact. More than half of the y/y decline in the pork cutout is due to lower pork belly prices. We think a slowdown in food service demand has resulted in a backlog of bellies in the freezer. Pork belly prices should be higher in June and July, but much will depend on the recovery of food service business and how quickly freezer inventories are depleted.
  • Ham prices are holding steady but lower than in March now that Easter demand is behind us. Loin prices, on the other hand, have far more upside price risk, especially considering the sharp increase in beef prices at retail.

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Demand May Be Weaker Than During 2021 And 2022 But It Is Not The Only Reason Why Prices Are Lower. The Supply Picture Is Not Getting As Much Attention As It Should

Lean hog futures remain under pressure and there is a lot of discussion about the state of pork retail demand. Several measures, whether the demand indexes that are reported by ag economists or real per capita expenditures suggest that retail demand has slowed down considerably. But it should be noted that demand was exceptional during 2021 and 2022. Some of this was due to the pent up demand created during the pandemic and especially the sharp increase in disposable incomes. At the wholesale level processors aggressively bid on product as inflation concerns induced them to accumulate more product in inventory and get buyers to buy more today because tomorrow prices might be even higher. But as some of the COVID induced demand subsided, the supply picture has come more into focus. The chart above illustrates the point. The supply of Q2 pork available in the domestic market on a per capita basis is expected to be the highest in more than a decade. This fact should not be ignored. While this supply is coming to market, the price of pork at retail in March was 30% higher than in March 2019. Pushing more product through the supply chain while at the same time slowing down sales via higher prices has been increasingly problematic. That’s what we are currently contending with, and it will take time for the market to adjust.

Our supply expectations are not particularly farfetched. USDA currently thinks that pork production during Q2 will be about the same as a year ago. If anything, this may be a bit optimistic. Already we are seeing slaughter numbers that are diverging from the March inventory data. On Tuesday afternoon USDA will tell us how much pork was in cold storage at the end of March. We think more supply was accumulated, especially for products such as bellies. It is not a coincidence that belly prices in the spot market remain weak given how much supply processors and packers already are carrying in cold storage. Tying up more money in cold storage at a time when your existing inventory is at a loss is not something buyers are willing to do. Lower prices are needed at the consumer level to match up supply with demand but that takes time, especially when you are dealing with foodservice operators. People like bacon but operators are paying far more for bacon these days due to higher labor costs. Also, bacon is an item that closely follows the broader trends in the fast-food market. If consumers are buying fewer chicken sandwiches, maybe because prices are up, they will also buy less bacon which is often used as a flavor enhancer. More retail bacon sales help to move volume at retail.

Our forecast is for belly prices to move higher into the summer. In part this is based on demand for bacon during the summer months and the effect of seasonally lower supplies on price. Currently the pork cutout futures are pegging the cutout for mid-August at around $100/cwt. To get to that price, it would be necessary for the belly primal value to approach $150/cwt, an 80% increase from current levels. One way for that to happen would be for end users to draw down inventories sharply in May and June. It is far from a sure thing however, especially if foodservice demand continues to struggle. Loins and hams would need to carry part of the value as well. A $100 cutout for August would imply ham primal values between $90 and $100 compared to around $80 currently. Mexico demand will be key as well as hog weights during the summer. As for loins, ample supply and competitive pricing should help bolster sales during the grilling season. Whether that will be sustained into August remains to be seen. For now, wholesale markets are signaling to retailers that supply is ample and pork remains an extremely attractive protein for summer features.

Price Chart


Steiner Consulting Group produces the National Pork Board newsletter based on information we believe is accurate and reliable. However neither NPB nor Steiner and Company warrants or guarantees the accuracy of or accepts any liability for the data, opinions or recommendations expressed.