Fresh Pork is Competitive With Beef And Chicken and Expected to be Even More so in The Fall

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Hog slaughter was estimated at 2.419 million head last week, only slightly higher than the 2.409 million head the week before. Slaughter remains about 100k head, or 3.5 percent, below last year, and over the last four weeks has averaged 3.3 percent lower. USDA pegged hog weights roughly steady with last year, though revisions are likely to show them about 0.5 percent lighter.

Pork production has been lower every week since mid May, while the cutout during this period has been 10 to 25 percent higher than a year ago. Supply remains about 4.4% under last year while last week the cutout was around 15% higher.

Processing items remain the strongest driver. The belly primal on Friday was quoted at $184/cwt, 38% higher than a year ago and contributing more than half of the y/y increase in the value of the pork cutout. Hams on Friday were up 8% vs. a year ago although they were trading much higher earlier in the week. Loins, however, have failed to keep pace despite the decline in production. On Friday the loin primal value was quoted at $95.4/cwt, 1.4% lower than a year ago.

Expectations are for ham values to remain well supported in the fall. Lower pork supply, combined with high prices for turkey breasts and choice beef inside rounds, should keep ham competitive in the deli case. The price of 23-27# hams in the first two weeks of August averaged near $120 per cwt, about 20 percent higher than a year ago. Yet the price ratio of hams vs. turkey breast was just 0.22, on the low end of the ten-year range.  With ham values coming down this week while turkey breast has moved higher, the ratio has declined even more.  Ham prices have also been trending lower relative to choice beef inside rounds. In August, the price ratio was 0.28, down from as high as 0.4 in 2022. Tight lean beef supplies in the US should continue to underpin the value of lean cuts, especially in the fall when demand improves.

Loin values so far have tracked last year’s levels even as supply has been more limited. This presents an opportunity for retailers, especially in September and October, to take advantage of a strong value proposition. In August, the average price of boneless pork loins has been around $158 per cwt, less than 45 percent of the price of 81CL coarse ground beef at around $352 per cwt. In July, coarse ground beef was $360 per cwt and it is likely to be even higher in the second half of August. Similarly, loin prices have declined relative to boneless skinless chicken breasts. Chicken breast prices have averaged around $200 per cwt in the last couple of weeks, implying a 79 percent ratio of boneless pork loins to breast meat.

Less Pork In Cold Storage This Summer

Total pork in cold storage at the end of July was 404.6M pounds, down 10.8% y/y and 16.4% lower than the five-year average. This was the lowest end of July inventory since 2010.

Inventory in July declined 3.4% from the previous month consistent with the normal decline for this time of year.  However, inventories declined from an already low level, impacting spot availability/pricing during July. Pork supply should be seasonally higher after Labor Day, and hog carcass weights should also increase. Competitive pricing relative to beef and chicken, combined with increased availability, offers retailers opportunities to feature pork, especially with Pork Month approaching.

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Forecasts