While Pork Cutout Continues to Trend Lower, Some Items Are Bucking The Trend

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Hog slaughter was expected to reach 2.6 million head this week, but a series of downward revisions due to plant maintenance issues resulted in an actual weekly slaughter of 2.583 million head, about the same as the week before and 2.6% lower than a year ago. Over the last four weeks, slaughter has been down 1% y/y while weights have increased by about 1%. Overall, supply in recent weeks has been roughly the same as last year.

Feed costs are trending lower, and spot hog prices remain above breakevens, so producers are not in a hurry to market hogs despite heavier weights. Packer margins, on the other hand, have been less than stellar. Export business remains underwhelming, particularly for offal and exportable carcass parts (hind/front legs, picnics, etc.), so packers are also not pushing to ramp up slaughter. The key question for the next few weeks is whether the price trajectory for hogs will resemble 2022 and 2024, or follow the 2023 pattern—a scenario producers would like to avoid. In 2023, prices fell from over $100/cwt in July to below $50/cwt by year-end. There are, however, both supply and demand differences this year compared with 2023. That year, there were more hogs in the pipeline and producers were deep underwater, so the incentive was to market as soon as possible. Weekly slaughter in the three weeks after Thanksgiving 2023 averaged 2.683 million head per week. Last year it was about 100,000 head per week lower, and if the September survey is accurate, slaughter this year could be even lighter.

Demand remains the key issue, both from export and domestic channels. The loin primal is trending lower but remains above year-ago levels (see chart). Higher prices for competing items, particularly ground beef, continue to provide support. We also expect loin prices to rebound more quickly and remain above 2025 levels in Q1 2026, reflecting the expected decline in slaughter and continued demand improvement.

Belly prices have gained about $15/cwt in the last few days, though some of this appears tied to lower-than-expected slaughter (catching some end users short) and preparations for holiday features. Bellies typically decline by early December as slaughter reaches annual highs and holiday demand fades. Given high bacon prices last spring and summer, there will likely be more demand to start building inventories early. We expect prices to rebound in Q1.

Hams are the most problematic. High prices in the summer may have negatively affected holiday pricing and sales, and the trend is now down. Q1 pork supply is expected to be down. We urge you to take advantage of lower prices in December and begin covering Easter needs earlier than in the past.

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