Source: Rita Jane Gabbett, MEATINGPLACE, 12/20/17


Pork production margins rebounded in November after sharp declines in October, USDA reported in its latest Livestock, Dairy and Poultry Outlook report.

November margins were driven by strong wholesale demand for pork products and by lower than expected November hog slaughter numbers that likely supported pork product values. Although hog prices averaged higher in November than in October, higher wholesale pork product values offset packers’ higher input costs and reversed falling October margins.

November’s gross packer margin averaged almost $25 per hundredweight (cwt), more than 21 percent higher than the average per cwt margin in October.

Packers’ major input cost — hogs — increased in November, compared with October, however. Hog prices — live equivalent 51-52 percent lean — averaged $46.46 per cwt, more than 6 percent higher than the October average and 35 percent higher than a year earlier. 

But on the output side of packers’ ledgers, the wholesale value of the pork carcass averaged $81.55 per cwt in November, almost 9 percent higher than the October average. The byproduct drop value in November increased almost 2 percent, as well. So on average, packers paid more for hogs but were more than compensated by higher product values, which translated into wider gross margins for the month of November.

It is notable that most of the October-November average value difference in the wholesale pork carcass cutout is attributable to the belly primal. While hams, picnics, ribs, butts, and 'other’ all contributed to the (positive) difference in the average value — with loins and hams subtracted — the belly primal accounted for more than three-quarters of the October-November difference.
Lower than expected November pork production and flat beginning cold stocks likely contributed to higher product values.

Estimated federally inspected hog slaughter in November was about 10.5 million head, about equal to last November’s slaughter.

Average daily hog dressed weights for November—calculated from the National Daily Direct Hog Prior Day Report—were about 1 pound above a year ago, suggesting that hog flows were relatively current through November. Stocks on October 31 were close to historical averages for the month also: at 597 million pounds, cold stocks were slightly below those of a year earlier, but about 3 percent above the 5-year average.

Year-end expectations
Fourth-quarter pork production is expected to be almost 6.8 billion pounds. Although a reduction of about 200 million pounds from last month’s forecast, due mostly to lower than expected November hog slaughter, this production volume would be almost 2 percent above a year ago and record-high for the quarter. Fourth-quarter hog prices are expected to average $44-$45 per cwt, more than 20 percent higher than a year ago.

These prices are driven by lower than expected fourth-quarter hog slaughter numbers, year-over-year higher packer demand—which increased sharply in September 2017 when two major packing plants opened in Michigan and Iowa— as well as sustained domestic demand for bacon and robust foreign demand for U.S. pork products.

USDA will release the Quarterly Hogs and Pigs report on December 22, 2017. The report will provide information on December 1 inventories, as well as on fall pig crop numbers and producer farrowing intentions for the winter and spring pig crops.

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