Trend is Headed in the Right Direction for Pork Producers, CoBank Says

After 17 consecutive months in the red, pork production is returning to profitability, says Brian Earnest,  lead economist, animal protein for CoBank Knowledge Exchange Division.

"Pork’s big story in recent years has been lack of market strength for pork products (outside of bacon) at retail outlets. This, combined with retail prices of processed products lurching higher in recent years, has discouraged disappearance and pressured producer returns. Much like the story for chicken, it seems hog producers are starting to breathe again as feed prices retreat," Earnest writes in The Quarterly report.

Not only are margins improving for wean and farrow-to-finish operations, but Iowa State estimates wean-to-finish operations were about $5.50 per head in the black for February after a $39 loss a year earlier, he writes. In addition, feed costs are improving. This combined with improved domestic and foreign demand provides more hope for pork producers.

U.S. pork exports grew by 7.5% or 500 million pounds in 2023, and the USDA forecast suggests another 4% growth for 2024, he adds. Analysts attribute the surge in export opportunity to the peso trending closely with the U.S. dollar, and strong economic conditions.

"After recovering from the polar vortex-related production decline early in the quarter, pork production remained elevated, and yet the cutout value still surged, up 19% YoY to end March. That was a function of improved loin, rib, butt and belly prices," Earnest notes.

Despite the improving market conditions, the latest USDA Quarterly Hogs and Pigs report hinted at supply moderation through much of 2024, as the breeding herd continues to contract annually (down 2% year over year on March 1).

"This suggests plenty of potential left on the table for pork. The bottom line for pork margins is that the trend appears to (finally) be headed in the right direction," Earnest writes.