It has been a better-than-usual fall

Pork cutout value has been remarkably strong this fall. Over the last eight weeks, cutout has averaged $97.46/cwt. That is $8.62 higher than the same weeks last year. Two of the eight weeks were above $100/cwt. This strength in cutout has not been fully reflected in hog prices, but hog prices have been strong enough to boost profits.

Calculations by economists at Iowa State University put October profits for typical Iowa farrow-to-finish operations at $9.30 per hog sold. That was $27.82 better than a year earlier. It was the best October profits since 2021 and was the seventh consecutive month of black ink following seven consecutive months of losses.

Cost of production for Iowa hogs dropped in October to $82.29/cwt (carcass weight). That was the lowest level since December 2021. Declining corn prices are a major factor in the lower cost of producing hogs. USDA is predicting the average farm price of corn for the current marketing year at $4.10 per bushel. That is 45 cents lower than last year and $2.44 lower than two years ago. It looks like corn prices will remain fairly stable, providing the growing season weather is not adverse in the major corn growing states. The five corn futures contracts for 2025 are currently trading at $4.40 per bushel plus/minus 8 cents.

The average liveweight price for 51-52% lean hogs in October was $61.52/cwt. That was 26 cents higher than the month before, but it was the second lowest month since March. Hog prices in recent weeks have been more favorable.

The average retail price of pork in October was $4.92 per pound. That was 3.4 cents lower than the month before and 12.3 cents lower than a year ago.

Despite a lot of red ink in 2023, pork production has continued to increase. 2023 pork production was up 1.1%, 2024 production is up 2.0% and 2025 is forecast to be up 1.9%. USDA has pegged 2024 51-52% lean hog average price at $61.05/cwt of liveweight, up $2.46 from last year. They are currently forecasting a $2 price decline for next year.

As is typical at this time of year, the lean hog futures contracts indicate hog prices will put in an early-winter low then rally to a summer high.  What is not so common is that the nearby December, February and April hog contracts for 2024-25 are trading well above their deferred counterparts for 2025-26.  Granted, the volume on the deferred hog contracts is extremely low.

It is tough to make valid year-ago comparisons on hog slaughter right now. Last year at this time Thanksgiving was four days behind us and this year it’s three days ahead of us. Last week’s hog slaughter was 15.5% higher than a year ago. This week’s slaughter is likely to be 16% lower than a year ago. Hog slaughter continues to lag well below the expected level. Not counting last week, the previous 11 weeks saw U.S. hog slaughter that was 0.04% higher than last year. The September Hogs and Pigs report indicated it would be up 4.07%.