The U.S. hog market continues to struggle with prices below breakeven and a general lack of market enthusiasm.

Some Observations

• Iowa - S. Minnesota hog weights declined weekly from 289.1 lbs. to 286.8 lbs. (-2.3 lbs.). Weights are 3.5 lbs. lower than the same time a year ago.

• Last week U.S. slaughter was 2.575 million head. A year ago, same week 2.436 million. We believe the only way these high slaughter numbers can be achieved is by pulling weights down and pulling hogs ahead. The aggressive slaughter numbers by packers indicate to us relative demand despite a lack of market enthusiasm. We would not be surprised to see further aggressive weight decline in hogs. You only kill them once and at some point, the dog hits the end of the chain and weekly hog numbers decline pushing prices higher.

• Last week the USDA released the January Cattle Inventory Report.

Cattle January 1 (1,000 head)
	2022	2023	% of Previous Year
Beef Cows	29,983.1	28,917.9	96%
Heifers for Beef Cow Replacement	5,481.5	5,163.7	94%
Total Beef Cows plus Heifer Replacements	35,464.6	34,161.6	96%

Inventory of Beef Cows and Replacements is down over 1.3 million from a year ago. Drought and lack of profitability cutting U.S. Beef herd. This is the lowest Beef Herd inventory since 1962. Put in context of U.S. population there were 186.4 million people in the U.S. in 1962 and in 2022 there were 333.3 million. A lot more people to eat about the same amount of Beef. We will see record Beef prices. This will be supportive for Hog prices and makes current low hog futures a joke. Beef cut-outs 3.5 times Pork currently, you sure would hope this in itself would push Pork demand. Unfortunately, hope is not necessarily a good business plan, producing Pork that has taste that chases Beef maybe is a plan.

• Last week we had Spanish producers – packers – processors visit Genesus. Spain with 2.6 million sows is the largest producer in Europe. The visitors were buoyed by the news that Spain’s market hog price hit a new record high last week of 1.750 Euro/kg liveweight. The Euro = 1.08 U.S. dollar. 1.89 U.S./kg liveweight or 86¢ U.S. lb. liveweight. Spain hog price about 30¢ lb. higher than U.S. or over $80 per head. Huge difference. You would think this would lead to increased U.S. pork exports as buyers look for lower priced product.

• Spain has high feed costs like the rest of Europe. Break evens are higher than the U.S. but the new record prices have producers in position to make money. The Spanish break evens are challenged by higher mortality due to aggressive PRRS and removal of copper sulfate and many antibiotics. The national record keeping system that has over 50% of the national herd reporting is indicating the average sow mortality 14% and average combined nursery-finishing mortality 14% up from 9.3% in 2020. Both sow, nursery, finisher mortality is climbing just as in the U.S. Unfortunately for producers some genetics seem to be bred to die easy. Dead pigs don’t get to market.​​​​​​​

• Spain’s record high hog price is being pushed by the lower hog numbers in Europe we have been predicting for the last 18 months. The latest hog slaughter numbers from Europe are from October with 19.29 million hogs marketed down 6.1% from October last year. The decline just over 1 million market hogs in the month. Less hogs always lead to higher prices. We expect further hog price increase in Europe as the sow herd liquidation of 2022 leads to even fewer hogs in 2023.

Summary

For U.S. producers it's hard to see light when you are losing money. Our observation. U.S. has less hogs, there will be significantly less Beef, Europe the major Pork export competitor will have less Pork to export and at this point significantly more expensive Pork. We expect U.S. lean hogs to push to $1.20 lean this summer. It did last year, and we have less Pork and Beef in 2023.