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Tough Times for Pork Farmers

Tough Times for Pork Farmers
Jul 10, 2024
By Jean-Paul McDonald
Assistant Editor, North American Content, Farms.com

The only glimmer of hope for pork producers is the anticipated decline in corn prices.

By Devin Lashley
Farms.com Risk Management Intern
Photo Credit: Pexels - NC Farm Bureau

The summer, typically a season of increased pork demand and profitability, is not looking promising for pork farmers in 2024. The anticipated surge in demand has failed to materialize.  Several factors are contributing to this downturn, notably California's Proposition 12 which has dampened demand further.

The recent June 1st USDA Quarterly Hogs and Pigs Report did not offer much optimism for a significant rally in hog prices. The total inventory as of June 1 stands at 101% compared to last year, with the breeding inventory at 97% and market hogs at 102%. This indicates a 2% increase in butcher hog supplies over the summer, rising by 1% in the fall. Such numbers suggest potential packer capacity issues in the fourth quarter, negatively impacting hog prices.

Despite a gradual reduction in breeding numbers, the rate of culling is insufficient to significantly curb production, thanks to improved efficiencies in hog farming. Consequently, production levels are projected to rise this year and next, further straining the market.

Notably, breeding numbers have decreased by 10% in Iowa, 9% in Missouri, and 4% in North Carolina, indicating some regional efforts to reduce supply. However, the broader industry remains hesitant to make substantial cuts, leading to significant projected losses for 2024. This reluctance may eventually force bankers to intervene and mandate a severe cull.

California's Proposition 12, which sets strict standards for the treatment of farm animals, appears to have hobbled summer pork demand. Unlike last year, when there was a rush to secure frozen products compliant with Prop 12, this year's demand has been weak. Prop 12 has done nothing but increase costs and made an already challenging market even worse.

Export demand, particularly from Mexico, is critical for the U.S. hog industry, which sends 40% of its pork exports to Mexico, accounting for nearly 10% of total production. Any disruption in this trade could severely impact U.S. hog prices especially if political changes occur with the next U.S. presidential election. Such disruptions could severely impact the largest buyer of U.S. corn and pork.

The only glimmer of hope for pork producers is the anticipated decline in corn prices. Corn prices fell by 10% in the second quarter, and with expected trendline yields, prices could drop even further this fall below $3.00/bu. However, this potential reduction in feed costs is overshadowed by the overall negative outlook for the pork industry. The U.S. corn industry has become the global storage bin of corn with farmers still storing 61% of last years corn in a bin!

In summary, the U.S. pork industry faces a tsunami of bearish headwinds, with oversupply, regulatory impacts, and export uncertainties creating a challenging environment. The summer demand boost has not occurred, and California's Proposition 12 has further dampened market prospects. Unless significant changes occur, U.S. pork producers are in for tough times ahead.

 

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