Frozen stocks of pork are rebounding but have not yet reached pre-Covid 19 levels. According to the USDA cold storage report, cold stocks of pork at the end of May are down 7% from the previous month and 4% from a year ago. Poultry stocks are up 2% from the prior month and 9% from a year ago, while beef is down 6% from the prior month and down 20% from last year. While frozen pork stocks tend to decline seasonally from April through May, this is the first time this year that stocks have fallen below year ago levels, which may be somewhat of a bullish sign for pork prices.
The USDA forecasts U.S. per capita pork consumption at 50.0 pounds per person in 2023, falling to 49.9 pounds per person in 2024, reflecting concerns for consumer purchasing power in the face of inflation, the availability of pork, and strengthening export demand.
The U.S. exported 581 million pounds of pork in April, or about 10% more than in April of 2022. While shipments to traditional customers continue, the U.S. share of pork exports should grow through 2023, with a pullback in European production due to high feed and energy costs exacerbated by the war in Ukraine. April numbers indicate U.S. pork exports grew year-over-year by 4% to Mexico, 26% to China, and 42% to South Korea—all major markets for which European exports declined the previous three months by 38.2%, 4.8%, and 32.2%, respectively. The USDA estimates U.S. pork exports in the 2nd quarter of 2023 to be 1.73 billion pounds, or 7.5% higher than last year, and forecasts the last two quarters of 2023 to be 6.7% and 6.9% higher, respectively, placing the annual total at 7.3% above last year. The 1st quarter of 2024 is forecast to be 1.745 billion pounds or about 4.6% higher than in the 1st quarter of 2023.
Overall, with the outlook for hog prices, current costs of production exceeding $100/cwt on a carcass basis, and prospects for higher feed costs, producers will need to be vigilant with risk management of input and output prices to find their way out of red ink and into the black. The forecast presented here is for the national weighted average net price on a carcass basis for all transactions for producer-sold barrows and gilts, including negotiated and contract prices. This net price should be more reflective of what producers receive, on average, and normally runs at a premium of more than $2/cwt over the base price on average. From March through May, this net price averaged $79.88/cwt compared to $75.39/cwt for the corresponding net prices for negotiated or spot transactions.
In general, hog prices tend to be higher in the 2nd and 3rd quarters, with lower prices in the 1st and 4th quarters. Consistent with that pattern, this price series is forecast to average about $89.26/cwt for the 3rd quarter of 2023, falling to $81.03/cwt by the 4th quarter and $79.93/cwt for the 1st quarter of 2024, before rising to $88.18/cwt for the 2nd quarter of 2024. These projections are consistent with the supply and demand scenario currently anticipated. However, if greater production is realized or if export demand softens, prices may be lower.
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Source : illinois.edu