In the first quarter this year (Jan-Mar) European pig production declined significantly. Europe has had about double U.S. production for many years. Europe is the United States Number 1 competitor for global pork exports.

Europe had declined 1 million sows in 2021-22. The results of this can be seen in the first quarter. Europe had a hog slaughter of 57.1 million head. Down 4.7 million (-8%) from the first quarter in 2022 (61.8 million). The 4.7 million decline is 360,000 fewer market hogs per week.

The decline of hog production was widespread. Spain (Europe’s largest producer) -9%, Germany (Europe’s second largest producer) -8%, Denmark -12%, France, Netherlands and Belgium -7% average.

A reflection of lower supply in the first quarter is the higher prices in 2023 compared to 2022. January 28, 2022, Spain price 1.03 Euros/kg. This year same time 1.72 Euros/kg. Current Spain price 2.02 Euros/kg. (Price change 50¢ lb. U.S. to now $1.00 lb. U.S. liveweight). On a 125 kg (275 lbs.) pig a gain of €125 Euros ($140 U.S.). No doubt fewer hogs lead to higher prices.

We don't have EU pork statistics from the first quarter, but we expect the lower hog production which led to almost 500 million tonnes less pork produced leading to a major decline in port exports. Probably a reason that recent U.S. pork exports appear to be about 20% higher year over year in recent weeks. We expect European production decline will be conducive to even greater U.S. exports over the coming months.

Genesus has breeding stock production in the United Kingdom, France, Spain, and Germany. Our observation is that Europe has not stopped lowering their sow numbers. High feed costs, African Swine Fever, environmental regulations including farm closure plans, labour issues, less antibiotic usage, disease are all factors leading to a very wary industry.

The pig slaughter numbers first quarter were from a sow herd in the beginning of 2022. There was continued liquidation throughout the rest of 2022. European hog slaughter numbers will continue significantly lower throughout 2023.

The dynamics of sow liquidation that has driven Europe's hog prices to record highs are now in play in the United States, Canada and Mexico. There is no doubt all three countries are cutting production base.

Other Observations

• Last week U.S. pork production was 498 million lbs. - 10 million lbs. less than a year ago. Beef production 515 million lbs. – down 24 million lbs. from a year ago. Total Red Meat Production for the week 1016.8 million lbs. A year ago, 1050.9 million lbs. (-34 million lbs. –4.5%). Certainly, beef prices are reflection of the lower production with Choice Beef cut-outs $3.42 lb. Pork 92¢ lb. If we could only get pork to half of beef that would be pork cut-out of $1.72 lb.

Maybe someday we will realize as an industry that taste drives demand and our salvation is producing pork that chases beef in the marketplace.

• Data on U.S. heifer and cow slaughter seems to indicate that the beef herd is not expanding maybe even still contracting. For pork producers this will continue to support our prices over the coming months. Probably not a panacea for industry but it will help.
• Last week after the World Pork Expo traveled Minnesota, Iowa, Illinois, Indiana and Michigan. We are aware price of corn took big spike end of last week. Our drive by crop tour seems to show areas where there was lots of moisture (Minnesota) to Southern Illinois much drier. Most areas could use rain but if it rains soon crop will be back on track.
• Last week Iowa and S. Minnesota weights on 741,000 hogs averaged 279.9 lbs. a huge drop of 3.9 lbs. from the week before. A year ago, average weight was 286.3 lbs. Last week 6.4 lbs. lower than a year ago. A big difference. The difference has been done with temperatures that are not hot, that would have enhanced weight to decline. Our farmer arithmetic would equate 6.4 lbs. difference to 3 days slaughter or about 1 million hogs (once dead always dead). This is a bullish sign of possible short term price increase possibility. Reason = how low will weights go (heat?) before slaughter gets cut maybe 100,000 head, what would that do to push pork cut-outs higher?

The other consideration if we have pulled hogs ahead what is hog supply going forward. We expect even fewer hogs coming to market as liquidation factors cut numbers in the future.

Summary

Lower hog numbers in Europe from liquidation has doubled hog prices there. This is supporting U.S. pork exports. Liquidation is well underway in U.S., Canada, and Mexico. This will lead to higher hog prices.