Steiner and Company produces the Profit Maximizer report on behalf of National Pork Board 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.

Highlights

  • The results of the ‘Hogs and Pigs’ survey will be published on Thursday. Expectations are for a very modest increase in supply this winter following with some supply expansion next spring and summer.
  • The seasonal increase in pork supply is here and that should help ease some of pressure in the market. The last time weekly hog slaughter was near 2.6M head was in January. If estimates are correct, we should see a few more 2.6M weeks before the end of the year.
  • Ham prices have been pressured lower now that slaughter is moving higher. Sales to Mexico have also been slow to develop, possibly as buyers sit on the sidelines and wait for the seasonal increase in production. Hogs coming to market are now heavier than a year ago, driving a wider price spread between light and heavy hams.
  • Belly prices have been key for supporting pork cutout value through the summer. The seasonal supply gains are expected to pressure belly prices lower. Trim prices are also expected to move lower, especially fat trim prices that during certain times in August surpassed lean prices.

Full Report

Market Landscape

USDA will publish on Thursday, September 25 the results of its quarterly survey of hog producers, providing a baseline for supply projections in the next 12 months. Judging by the number of hogs that have come to market this summer, we expect a significant revision to the pig crop estimate for the Dec–Feb quarter and to the overall inventory reported on June 1. What will be less clear is the estimate for the Mar–May pig crop. Based on survey results regarding the supply of market hogs, USDA could revise those estimates as well, although larger adjustments are more likely once fall slaughter numbers are known. Given lower than expected slaughter this summer, market participants will likely discount some of the fall and winter projections. We would caution, however, that just because disease or other factors affect supply in one quarter, this does not automatically imply a similar trend in other quarters.

A critical number for future supply is the size of the breeding herd. We think the sow and boar breeding inventory as of September 1 will be around 6 million head. This would be a 20,000 head increase from the June 1 report but still about 0.7% lower than a year ago. Sow slaughter has been lower in the last three months, but at the same time there has been a notable reduction in sow imports from Canada. We do not yet know gilt retention during the Jun–Aug quarter, but it can be estimated based on the size of the breeding herd and the historical relationship between retained gilts (a calculated number) and sow slaughter. We think gilt retention will be lower than a year ago, largely because the overall herd is smaller. If the primary reason for retaining gilts is replacement, then fewer replacements are needed with a smaller herd. Producer margins have been strong in the last six months, and low feed costs should provide an incentive to expand the herd in the next six months. But this will be a slow process, unlikely to be achieved in a single quarter.

We think the pig crop for Jun–Aug (hogs that will likely come to market this winter) will be up about 0.6% from a year ago. This reflects expected farrowings down 0.4% y/y and a 1% increase in pigs per litter. Will farrowings increase in the fall? It is possible, even though the breeding herd is smaller than last year. The farrowing rate has been low in the past two years, but with improved profitability we could see it approach 2022 levels. If that occurs and combined with the trend increase in pigs per litter, we could see a 1.5% increase in the Sep–Nov pig crop. Our slaughter forecasts for next spring reflect this expected increase in the fall pig crop.

Seasonal Supply Increase Is Here

Weekly hog slaughter was revised slightly lower but at 2.588 million head it was the second highest weekly slaughter so far this year and 2.8% above year ago. Slaughter this week is expected to hover around 2.57-2.58 million head, 0.7% higher than a year ago. This would be the second consecutive week of hog slaughter posting an increase vs. a year ago. Pork production last week was likely up 3.5% y/y (higher slaughter + heavier weights) and we think it will be up 1.5% this week. 

Going into October, pork supplies should continue to trend higher, helping ease some of the supply pressures that developed during late spring and summer. Fresh pork demand should continue to benefit from record high beef prices and consumers looking for affordable protein. Ham prices that were flying high in the summer should also ease a bit lower with more supply coming to market. 

Demand from Mexico is always a wild card for hams. Sales to Mexico were strong in August but have been trending down the last two weeks. It could well be that Mexican buyers are looking for supply to seasonally increase before bidding on product. If that’s the case, the higher slaughter last week and this week says the time to start buying is now.

Price Chart

Forecasts

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.