US pig industry faces severe challenges

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 The recent levels of profitability experienced by the US pig industry may take an extended period to recover, according to Economist Dr. Lee Schulz of Iowa State University. He anticipates an overall loss of nearly US $ 21 per pig for the US swine industry this year.

Input costs have risen significantly across various fronts. An analysis by scientists at Kansas State University reveals that from January 2020 to April 2022, corn prices surged by almost 80%, soybeans by 42%, petrol by 48%, and refrigerated trucking rates by 50%. These costs have either remained constant or worsened this year. Additionally, California’s Proposition 12 and animal welfare laws in other states are leading to substantial expenses for housing retrofits for sows and other pig types.

Smithfield, the largest US pork producer, previously announced the closure of numerous farms in Missouri in May and confirmed on October 9 that it would soon shut down a North Carolina pork processing plant, citing efficiency reasons.

Simultaneously, the demand for pork is low and may further decline. This could be attributed to inflation or the efforts of animal welfare groups. Jim Long, president of genetics company Genesus, pointed out in a recent commentary that while overall meat consumption remains high, pork consumption as a percentage of that has decreased.

Long reflected on the significant rise in chicken consumption over the last six decades, stating that “chicken has kicked our ass.” He noted that per capita annual chicken consumption has surged from 28 lbs. (12.7 kg) in 1960 to over 100 lbs (45 kg) now, while pork consumption has dropped from 59 lbs (26.8kg) to about 54 lbs (24.5 kg) during the same period.

Long questioned whether the pursuit of ever-leaner pork has damaged the industry, emphasizing that taste is the main driver of consumer choice. He highlighted the challenge of producing loins that do not appeal to consumers, leading to many restaurants excluding loin from their menus.

Reuters news agency reported on October 20 that lean hog futures on the Chicago Mercantile Exchange have reached life-of-contract lows, with concerns about weak demand at the forefront. Lean hog futures are described as a crucial “hedging instrument” to manage the risks of price volatility. Independent futures trader Dan Norcini, quoted by Reuters, expressed concerns about potential recession fears affecting meat consumption.

Long warned that if the current trends in lean hog futures and grain futures persist over the next six months, farrow-to-finish producers could incur losses between $ 20-30 per head. With an estimated 60 million US market hogs over that period, this could result in a further US$ 1.2-1.8 billion equity loss for the industry, adding to the losses experienced over the past year.