Futures have rallied the last two weeks as market participants now expect Q4 production to be less than previously thought. USDA ‘Hogs and Pigs’ survey suggested Sep-Nov slaughter could be up as much as 4% y/y. Instead slaughter since September 1 has been almost unchanged.
Highlights
- Futures have rallied the last two weeks as market participants now expect Q4 production to be less than previously thought. USDA ‘Hogs and Pigs’ survey suggested Sep-Nov slaughter could be up as much as 4% y/y. Instead slaughter since September 1 has been almost unchanged.
- Fresh pork prices continue to perform well, thanks in part to lower than expected slaughter but also robust retail features. Loin prices should start to ease lower into November as retailers shift their merchandising towards holiday items.
- Mexican buyers stepped in last week to book over 24k MT, double the volume of previous weeks. This may help bolster ham prices in late October and early November.
- Pork trim prices have been well supported to this point but should start to slowly trend lower in the last two months of the year. Belly prices continue to trade very firm.
Report
We’ve had over a week to digest the most recent USDA ‘Hogs and Pigs’ report and have made adjustments to our forecasts. The key question is whether the report is overstating short-term supply and if productivity gains will persist into 2025.
One of the most puzzling figures in the report is the discrepancy between the Mar-May pig crop estimate and the supply of hogs weighing over 120 pounds. According to the report, the Mar-May pig crop was up 2.1% from the previous year, an upward revision from the June estimate. Typically, this spring pig crop dictates slaughter numbers for Sep-Nov, as it takes 5-6 months for pigs born in the spring to reach market weight.
The report also indicated that the inventory of hogs over 180 pounds was slightly over 13 million, a 600,000 head increase (+4.8%) compared to last year. However, since the start of September (Sep 1 – Oct 5), hog slaughter has totaled 12.561 million—just 43,000 head higher (+0.3%) than a year ago. This raises questions: are producers delaying marketing, or are packers slowing down slaughter to support cutout values? Considering nearly half of all hogs are packer-owned, this could be a plausible explanation. However, if this were the case, we’d expect to see a significant increase in hog weights.
While the average weight of packer-owned barrows and gilts has increased by 3.2 pounds (+1.5%) since late August, this is lower than the typical 3.8 pounds (+1.8%) increase seen in previous years. Producer-owned hogs have seen even slower weight gains, up just 1.4% compared to 2% last year and a 1.7% average increase over the past three years.
This data suggests the report likely overstated the inventory of hogs over 180 pounds. As for hogs between 120-179 pounds, which should come to market from mid-October to the end of November (part of the spring pig crop), the survey estimated this group at nearly 15 million head, 500,000 higher (+3.5%) than last year.
Last year, weekly slaughter during this period averaged 2.624 million head. Based on the survey, we should expect weekly slaughter to average around 2.7 million, which seems unlikely given recent trends. Even using the Mar-May pig crop estimate, weekly slaughter would be around 2.68 million, about 100,000 more per week than recent levels. Until we see confirmation in the slaughter data, the futures market appears to be dismissing the report, and we’ve adjusted our forecasts accordingly.
Winter Supply Outlook
The Jun-Aug pig crop will determine slaughter numbers for Dec-Feb. The USDA estimated the pig crop to be 0.8% lower than last year, driven by a 1.7% decline in farrowings (births), which isn’t surprising given the June 1 estimate showing the breeding herd was down 3.2% year-over-year. In 2023 and early 2024, pigs per litter were up as much as 4% from the previous year, but it seems this has now returned to a more typical trend.
This lower pig crop estimate supports our forecast for reduced slaughter in Q1 2025, compounded by the fact that there will be one less marketing day in that period.
Limited Growth Next Spring and Summer
Farrowing intentions for Sep-Nov and Dec-Feb are projected at –0.1% and +0.2%, respectively. Factoring in a modest 0.8% increase in pigs per litter, we anticipate supply growth for next spring and summer to be under 1%.
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.
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