Seasonal Factors Impact Near Term Supply Outlook but Little Change in Expected Supply Availability into 2025

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.

Full Report

Lean hog futures have rallied in the last few days as high temperatures could significantly impact hog performance and the supply of pork coming to market. As the chart below shows, it’s quite common, indeed expected, for hog carcass weights to decline in the summer. Different from many other animals, pigs find it more difficult to transfer heat since they cannot sweat and their lungs are small, making it more difficult to transfer heat via panting. One natural response to increase in temperature is for pigs to reduce food intake. By eating less pigs reduce the amount of heat they generate, allowing them to stay cooler. This significantly impact hog carcass weights. Hog weights have already started to trend lower and the heat dome currently over the Midwest could see hog weights decline about 2% in the next two weeks. Even bigger declines have been registered in the past (see June 2021). Hog futures until last week had no premium for the summer months and now the market is in the process of adding some of that premium back in. Much will depend on spot product prices, especially on the price of processing items.

However, in the near term market participants once again are coming to term with the effect that seasonality has pork supply availability. Longer term, the outlook is for pork supply to remain stable. We will get a better idea on this when the results of the next USDA ‘Hogs and Pigs’ survey are released. Below is a brief recap of the latest data from USDA about both pork and overall meat protein availability in 2024 and 2025:

USDA revised higher production and per capita availability for both 2024 and 2025, but for different reasons. USDA raised expected 2024 production of the four main proteins by 115 million pounds vs. the previous month. Pork production was raised 40 million pounds (+0.1%), chicken production was raised 60 million pounds (+0.1%) and turkey production was raised 20 million pounds (+0.4%). The increases largely reflect the higher-than-expected production the previous month (higher weights) although the increase in turkey production was a bit of a surprise. Turkey poult placements were down by more than 7% in May, pointing to ongoing tight supplies in that market well into the fall.

USDA is holding firm to its idea that pork production in second half of the year will be up almost 5% y/y. More production days but also expectations for higher slaughter/higher weights are driving this forecast. So far this has been hard to argue considering Q2 trend but it will be a point of discussion once the quarterly survey data comes out. USDA expects pork production in 2025 to be up 1.1%. With exports expected to be up 3.4% next year, per capita pork availability is now forecast at 50.3 pounds per person (retail weight), slightly lower than the previous forecast and 0.6% y/y. 

USDA also revised higher its red meat/poultry production for 2025, with the revision all coming from a 245 million pound increase in its forecast to beef production. This was a 1% increase from the beef production forecast presented last month. USDA thinks that a higher placement rate in Q4 of 2024 will result in a higher slaughter in first half of 2025 than previously expected, something that’s always up for debate. Still forecast is for beef production in 2025 to be down 4.6% y/y.

Lower Peso Presents more Headwinds for Ham Values this Fall

Currency markets are especially sensitive to potential shifts in a country’s fiscal and/or monetary policy. That was the case with the Mexican Peso as the ruling party not only scored a win in the election but appears likely to steamroll other parties and gain a super majority in Congress. This could open the door to more spending and result in market distorting policies. Currently the Mexican Peso is trading at 18.5 to 1 USD, 13% lower than a year ago and the lowest since last fall. The effect of this is that suddenly US pork products have become more expensive for Mexican buyers. The second chart shows the implied value of #23-27 hams converted in Mexican Pesos. In late May the value of #23-27 hams was almost $94/cwt, near the highs we saw back in April. The short holiday week likely played a role. Since then ham values have declined and at the end of the week they were $85.5/cwt. However, the decline in the value of the peso means that in Peso terms prices are still on the very high end of the range for the year (see chart). Given the current value of the Peso, #23-27 ham values would have to trade in the mid-70s to yield a comparable price in Peso terms. This could present significant headwinds for the cutout in July and August, especially if the seasonal decline in production is not as significant as in past years.

Price Chart

Forecasts