Author: David Anderson

The Fall is often an interesting time to look at hog and pork markets because production typically increases seasonally, and prices decline.  Holiday ham demand usually kicks in to partially offset supply driven lower prices.  This year has some notable differences happening.

The hog industry has had a 7-month run of profits according to Iowa State University’s estimated farrow-to-finish returns.  Profits have been generated by much lower feed costs in recent months.  But, those profits are following huge financial losses in 15 of the preceding 17 months.  Losses have led to a reduction in the breeding herd and in sows farrowing.  USDA’s September 1 hogs and pigs report indicated the smallest breeding herd since 2016.  About 18 percent of the nation’s breeding herd are in the South.  June through August farrowings were estimated to be the smallest since 2013.  Only increasing numbers of pigs per litter, hitting 11.72 in the third quarter of the year, supported slaughter numbers.  Over the last month hog slaughter and pork production have been almost equal to a year ago.

While pork production has increased seasonally this Fall, supplies appear to be tightening compared to a year ago.  Hog prices are enjoying a counter-seasonal increase.  Iowa-Southern Minnesota barrow and gilt carcass prices have increased from about $75 per cwt to $84 per cwt over the last month.  The cutout is up about $7 per cwt over the same time.  Wholesale prices are higher for pork bellies, trimmings, ribs, and hams.  Bellies are up about $30 per cwt over the last month to $2.02 per pound.  They were $1.24 per pound a year ago. Trimmed pork spareribs hit $1.75 per pound last week compared to $1.18 a year ago.  

In the meantime, more retail pork features and specials are occurring compared to a year ago.  Retail prices for boneless hams are a little higher than a year ago while bone-in hams are a little cheaper than a year ago in the week leading up to Thanksgiving according to USDA’s retail price report. 

It’s going to take some sustained higher hog and pork prices to boost profitability enough to increase production in the coming year.  It’s likely that higher pork prices are ahead for 2025.

Anderson, David. “A Look at the Hog Market.” Southern Ag Today 4(47.2). November 19, 2024. Permalink

USDA released the October Cattle on Feed report on Friday, October 25^th.  The most anticipated number in the report was the quarterly number of heifers on feed.  Once per quarter, the report includes a breakdown of the number of steers and heifers on feed.  The heifers on feed have been some evidence of any herd rebuilding beginning.  The report indicated 40,000 fewer heifers on feed October 1 than last October 1.  That is less than one percent below last year.  It is the second largest number of heifers on feed for October 1 in the data going back to 1996.  

The continued large number of heifers on feed does not indicate much herd rebuilding in the works.  The drought monitor map indicates some drought across most of the country likely reducing some enthusiasm for heifer retention.  But, on the other hand, longer feeding periods mean that heifers are on feed longer, which would keep the number on feed higher.  A few more spayed heifers have been imported from Mexico this year than last, also contributing to more heifers on feed.  

Now for the headline numbers.  Feedlot marketings in September were two percent larger than the year before.  That translates to almost 2,000 head per day more than last year.  Placements were two percent smaller than a year ago.  More marketings and fewer placements resulted in the total number of cattle on feed being 4,000 head fewer than last October 1.  The number on feed was less than one-tenth of one percent below a year ago, so not much really but, it was the first month with fewer cattle in feedlots since June.  All in all, the report did not offer much of a surprise.

---

Anderson, David. “Fewer Heifers on Feed.” Southern Ag Today 4(44.2). October 29, 2024. Permalink

Most people have likely seen the news that McDonalds is rolling out, for a limited time, a Chicken Big Mac.  Some of you, of a certain age, might be singing the words in your mind now: “two all-beef patties, special sauce…”  A question on many cattle producer’s minds has been “how long will people keep buying beef at record high prices?”  If beef prices are higher relative to chicken prices might people begin to buy more chicken?  Those are great questions about beef demand because relative prices matter.  We would expect some changes in purchases away from beef as it becomes relatively more expensive.  I don’t purport to know the goings on in McDonald’s as they create strategies to build their business but, we can look at some relative prices in the wholesale meat market to shed some light on the input price side.

In this case, we can compare wholesale chicken breast prices to beef trimmings prices to look at relative changes over time that might lend some support to trying a new menu item.  There are several data series that could be used to capture the longer-term trends.  On the chicken side we can use line run chicken breasts or boneless, skinless breasts.  On the beef side, a number of different lean-to-fat ratios for trimmings could be used.  This example uses line run chicken breasts and 81 percent lean beef trimmings.

The price of line run chicken breasts was only 34 percent of the price of 81 percent beef trimmings in late August 2024.  The only time in the last 15 years that chicken breasts approached a lower relative value compared to beef was in the Summer of 2020.  The trend over the last couple of years has been for chicken breasts to decline in value relative to beef trimmings.  Much of ground beef comes from culled cows and cow prices have increased dramatically as the cow herd has declined in number.  Lower chicken prices create incentives to try some new chicken-based menu items.  

Live cattle and meat prices are quoted in dollars per pound or cwt.  But, a restaurant has to put together a meal, a plate, or a dinner that hits a price point that people want to buy.  Cheaper chicken relative to beef creates opportunity for new items to help restaurants reduce their costs.  Beef prices are likely to remain relatively more expensive than chicken for some time to come.

---

Anderson, David. “An Alternative Big Mac.” Southern Ag Today 4(43.2). October 22, 2024. Permalink

Cattle and calf prices have been sliding lower for more than a month.  For the most part, prices remain higher than last year at this time, even though they are declining.  In the middle of this slide comes the next cattle on feed report which will indicate fed cattle supplies for the next few months.  

The next cattle on feed report will be released on Friday, September 20^th.  Most market analysts’ forecasts are published by now and, generally, indicate that they expect marketings and placements to be below last year.  Feedlot marketings should be down about 3.5 percent lower than last year.  While below last year, one less workday during August means that daily average marketings were slightly higher than last year. 

There is a fairly wide range of market analysts’ estimate of placements, from down 4 percent to up 2 percent.  Seasonally, August placements tend to be large as calves born in the Spring and yearlings coming off summer grazing programs start to be placed.  September and October tend to be the months with the most feedlot placements.  Fewer feeder cattle were sold this August than last year according to available data on feeder cattle sales and feeder cattle reported on the CME feeder cattle index.  But, about 29,000 more feeder cattle were imported from Mexico during August.  August placements also occurred against a backdrop of falling fed cattle futures prices.  Even though corn prices continued to decline lower fed prices forced lower feeder cattle prices throughout the month.

Typically, more feeder cattle are placed than fed cattle marketed in August.  That is likely the case again this year, which leaves the number of cattle on feed up about 0.3 percent on September 1.  So, compared to last year supplies of cattle in feedlots implying fed beef production should remain close to last year’s level for most of the rest of the year.  

The report should support the continued trend of more beef production from fed cattle than a year ago.  Both fed steer and heifer weights are headed higher, seasonally, and are at record highs for this time of the year. The percent of beef grading Choice is higher than a year ago indicating that there are larger supplies of Choice beef on the market compared to last year.  From a beef supply perspective, it should not be surprising to see the Choice beef cutout and cattle prices struggling to gain ground compared to last year.

Watch for placements and the total number of cattle on feed in the report on Friday, September 20^th.  Those will provide some good information on beef supplies for the rest of the year.  Placements should be larger in September and October as Fall runs of calves start across the South and the rest of the country.

---

Anderson, David. “Summer Slide.” Southern Ag Today 4(38.2). September 17, 2024. Permalink

Whether or not herd rebuilding has started is among the most frequently asked questions.  For the most part, the answer is there is not much evidence of rebuilding yet.  The number of heifers held for herd replacement in the January 1 inventory report was the smallest on record.  The quarterly cattle on feed reports indicated more heifers on feed than a year ago which implies more heifers placed in feedlots rather than kept in producers’ herds to produce a calf next year.  However, there is a different set of data that might shed some more light on heifer retention.

Monthly cattle imports from Mexico have been greater than a year ago during every month of 2024.  We import both feeder steers and spayed feeder heifers which eventually go to feedlots.  The quarterly cattle on feed reports, which indicate the number of heifers on feed, would include those heifers that came from Mexico. If the number of feeder heifers imported from Mexico is large enough, it could suggest fewer U.S.-born heifers have been placed on feed in 2024. This could be an indication of fewer U.S. heifers available or that more heifers were held back for replacement.  

We have the weekly data for feeder steers and feeder heifers imported from Mexico beginning in January 2012.  Through the week of August 24, there were 347,401 feeder heifers imported during 2024.  That is 176,644 more than the same period last year.  It is also the most feeder heifers imported for this time period going back to at least 2012 when 303,290 head were imported.  Feeder heifers make up 37 percent of total feeder cattle imports, the highest since at least 2012. Over the same number of weeks, total feeder cattle imports (including steers) are the second largest behind only 2012.  

What does this mean for U.S. herd rebuilding?  If we take the total number of heifers on feed on July 1 and then subtract the number of feeder heifers imported from Mexico during January-June, it would indicate 126,784 fewer domestic heifers on feed than last year.  It is probably too big of an assumption to think all of those imports have already been placed in feedlots since many imported feeder cattle go to pasture before heading to feedlots.  Still, this result might indicate that a few more domestic heifers have been held back, although some of this decline could simply be due to fewer heifers born in the U.S. We certainly aren’t convinced of any widespread expansion yet.  However, larger heifer imports from Mexico are propping up the percentage of U.S. heifers on feed and need to be carefully considered when making comparisons to previous years.  

Anderson, David, and Josh Maples. “Feeder Heifer Imports from Mexico and U.S. Herd Rebuilding.” Southern Ag Today 4(36.2). September 3, 2024. Permalink