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

  • Hog supply continues to fall well short of expectations. Based on the June USDA survey, slaughter last week should have been 0.5% above last year. Instead, in the last four weeks slaughter has averaged 3.5% vs. a year ago.
  • Pork production has been consistently lower than a year ago since mid-May. Lower weights have further compounded the issue.
  • The shortfall in production, seasonal but also less than expected, has significantly limited availability in the near term. Processing items have seen the biggest impact. Best evidence of this is that fat trim is currently trading above lean trim.
  • The reduction in slaughter and export demand have significantly impacted bone-in ham availability. Seasonal supply increases should help moderate ham values. But demand is expected to remain robust, and futures currently imply ham prices into October in the low 100s.
  • Pork prices are far more competitive vs. beef and chicken going into September and October, pork month.

Full Report

Hog slaughter was estimated at 2.417 million head last week, up from 2.35 million the prior week and the first time since mid-May above 2.4 million head. Slaughter remains about 100k head (3.9%) below last year, and over the last four weeks has averaged 3.5% lower. USDA pegged hog weights roughly steady with last year, though revisions are likely to show them 0.5% lighter. With pork production down 4–4.5% y/y, the cutout is trading 17% higher than last year.  Indeed, this has been the case for much of the last three months. 

Pork production has been lower than a year ago every week since mid May while the cutout during this period has been between 10-25% higher than last year.

Processing items remain the strongest driver: bellies account for roughly half the y/y cutout increase, with prices up 41%. Hams are 18% higher and trim 23% higher. Loins, however, are only slightly above last year despite tighter supply and sharply higher beef prices. Key questions ahead are whether retailers will feature more pork in September and October (traditionally “pork month”), and whether the y/y slaughter decline will persist into fall despite what the Hogs and Pigs report indicated.

Expectations Are For Ham Values to be Supported in The Fall

Lower supply and 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 was near $120/cwt, some 20% higher than a year ago. And yet, the price multiple vs. turkey breast was 0.22x, on the low end of the 10-year range (see chart).  Ham prices have also been trending lower relative to the price of choice beef inside rounds. In August, the price multiple was 0.28x (i.e. bone-in ham price was only 28% of the price of inside rounds), down from as high as 0.4x in 2022. Tight lean beef prices in the U.S. should continue to underpin the value of lean cuts, especially in the fall when demand improves. Loin values so far have tracked with year-ago levels even as the supply coming to market has been more limited.

Opportunity for Retailers, Especially in Sep/Oct to Take Advantage of this Value Proposition

So far in August, the average price of boneless pork loins has been around $158/cwt, less than 45% the price of 81CL coarse ground beef, quoted at around $352/cwt. In July coarse ground beef was $360/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/cwt in the last couple of weeks, implying a 79% ratio of boneless pork loins to breast meat.  

Bottom line:  Pork supply should be seasonally higher after Labor Day. Hog carcass weights should be higher as well. Competitive pricing relative to beef and chicken and increased availability offer retailers opportunities to feature pork, especially with Pork Month around the corner.

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.