China is by far the largest hog producer and pork importing country in the world. Consequently, China’s production levels will always have a rippling effect on much of our global industry.
Over the last several months the China swine industry has had major losses similar to what has been experienced in the United States. While China’s hog price is high compared to the U.S., the cost of production is also high. Losses have been over $30 average per head for several months. China’s 12 million market hogs a week times $30 loss = $360 million industry loss per week. This has led to sow herd liquidation.
According to the latest data from China’s Ministry of Agriculture and Rural Affairs at the end of February, the national breeding herd was 40.42 million. The data indicated the National Herd declined 242,000 (-0.6%) in February and has declined 7.9% since the end of 2022 (3.1 million). The 242,000 decline in February indicates liquidation continues strongly.
We expect the sow herd decline is greater than 3.1 million as it’s difficult to monitor the many small producers in China. That being said a decline of 3.1 million sows is huge, the decline is over half of the U.S. herd which is the second largest in the world. It’s not if but when the dog hits the end of the chain. We expect by summer China’s hog price will move to over $1.20 U.S. lb. liveweight totally driven by less pork supply. This higher price will pull pork from exporting countries and consequently support every one of those countries market price.
U.S. Sow Herd
The U.S. official sow slaughter in February was 274.1 thousand a year ago it was 239.9 thousand. An increase of 35,000. January was 20,000 more than last year. An increase in the two months of 55,000 year over year. Last year the USDA March 1 Hogs and Pigs Report showed a decline of 58,000 breeding from December 1 (December 1, 6204, March 1, 6146). Our Farmer Arithmetic 58,000 decline last year in quarter an increase of 55,000 more sows slaughtered over 100,000 combined. We expect breeding herd should be down 100,000 March 1 from December 1. U.S. breeding herd would then be down 350,000 from 6,252 September 1, 2022, since then industry has lost about $30 per head average (our estimates industry loss $5 billion plus). Abracadabra less sows.
Prices
We watch the Daily National Average Price last Thursday it was 82.88¢ lb. The highest in a long time, what’s interesting the average price seems to go up every day, maybe by not much but it’s been a long time that it hasn’t creeped up day to day. If Iowa State University calculation that cost of production is about 88¢ lb. is correct. We are getting closer to breakeven. Can’t be soon enough and to be clear we don’t believe breakeven is a great victory, the industry needs profits.
For many months U.S. cash small pig price languished with sow producers losing gobs of money.
Cash USDA average Week of March 15
20232024
40 lb. feeder pig$85.89$94.21
Early weans (10 to 12 lb.)$39.64$49.80
Both early weans and feeder pigs now about $10 per head higher than a year ago. In our opinion a reflection of less supply and lower feed costs. Feeder pigs had been below the prior year price for well over a year.
Finally
Last Friday close
National Daily Pork Report Cut-outs 93.58¢ lb.
National Daily Boxed Beef Cut-outs Choice $3.10 lb.
The difference between Beef and Pork is huge. Beef more than triple Pork. We both are Red Meats (though some that tried to make us White, Other White Meat). Just imagine getting pork cut-outs only half of Beef – $1.55 lb. – profits all around.
To make our industry more economically sustainable it’s logical that we improve the taste of Pork. Beef commands the higher price because consumers will pay for the privilege to consume. Does anyone really believe it’s not driven by Beef’s ability to deliver a better taste. Beef’s grade system that indicates marbling has lead to more and more choice carcasses that have enhanced demand and price.
We can’t keep doing the same year over year. Pork has lost money and market share. We need a revolution. A pork taste revolution.
