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US Hogs Supplies to Shrink, Lifting Pork Prices

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US hogs are pointing to a 2.5% contraction in supplies during the first half of 2023 and possibly longer, signaling that wholesale pork prices next year could rival the records reached during the last two years. 

For much of 2022, high feed costs and California’s animal welfare law, Proposition 12, have been undermining producers’ breeding plans for market hogs (animals raised for slaughter). 

Gro’s Hog Feed Price Index, part of the Gro Custom Price Index application, is down 15% from its peak in May 2022. But the Index is still up 10.7% from this time last year and is 39% higher than two years ago. At today’s hog values, and these high feed input prices, producers are temporarily not profitable, but that should quickly shift as first quarter 2023 progresses, given the tighter hog supplies. 

Before increasing piglet headcounts, producers need to be confident about the direction of feed prices 10 months out. A market hog’s life cycle includes nearly a four-month gestation period and a six-month grow-out period. In the US, the last major hog expansion occurred in 2015-19 when feed prices were low and relatively stable. 

However, the USDA’s last report, in September, revealed that the US’ total hog headcount was at 73.8 million, down 1.4% from a year earlier. That report also showed that the US breeding herd contraction that began two and a half years ago continued, albeit at a slower pace. In September, the USDA said that the US breeding herd for swine was at 6.15 million head, down 0.6% from a year earlier and 2.86% below 2020’s level. During the last two and a half years, the US has lost a total of 8.8% in farrowing capabilities. 

The chart above shows how the US hog breeding herd has been declining since the pandemic in early 2020 briefly restricted animal movements to processing plants. 
This chart shows the US pig crop, which has been shrinking in tandem with the reduced capabilities of the US breeding herd. 

For much of this year, US hog producers have been waiting for a decision from the US Supreme Court on California’s Proposition 12, a law that establishes minimum space requirements for farrowing sows. That ruling is now expected in February 2023. 

Unless the Supreme Court overrules California’s law, which passed in November 2018 and took effect in January and was then quickly put on hold, producers cannot sell meat into California from market hogs that were not born in compliance with Proposition 12’s gestation crate regulations. California represents about 15% of US pork consumption, and currently, only about 4%-5% of US pork supplies are in compliance with Proposition 12’s specifications.

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