US: Demand remains key issue that could impact pork market in 2024

Pig slaughter last week was 2.7 million HEAD, the highest for the year, resulting in ample supply on the market. However, the impact on pricing varies greatly depending on domestic and EXPORT demand.

Good demand from Mexico and strong sales during the holiday season are supporting bone-in pork prices , although they are still below last year's levels (supply effect). In the second half of December, prices usually decrease. The ample supply is also keeping pork tenderloin and pork belly prices under pressure. However, frozen tenderloin prices are still quite high.  Loin prices , especially boneless loins, continue to be supported by good domestic and export demand.

Forecast for 2024

Wholesale pork demand is down sharply from 2021 and 2022, and current projections for pork production declines in 2024 also assume similar levels of demand. Current estimates call for modest growth in US per capita domestic demand . However, price increases are now well below the expected inflation rate. 

What is the forecast for the development of the pig industry for 2024?

On the supply side, growth is expected to be very modest, if at all. it has been a very loss-making year for manufacturers and there is generally a lag in terms of supply response. Breeding numbers as of December 1 are expected to be approximately 1.3% to 1.5% lower than last year. So far, increased productivity has compensated for the reduction in breeding stock. Increased competition from chicken retail and slowing economic activity are problematic from a demand perspective. The post- covid demand surge (2021/2022) has largely disappeared in 2023 and is unlikely to return in 2024.  

Wholesale prices are expected to be higher than in 2023, but projected wholesale prices will not be resilient enough to support production growth. Despite the decline in grain prices, profitability is expected to be low and inefficient producers will have to exit the market.

What will be the biggest obstacle to profitability in 2024?

Demand remains the biggest challenge. The obstacles created by Proposition 12 in California and Question 3 in Massachusetts have not gone away and could negatively impact sales in 2024. The supply of pork that meets the above requirements continues to lag behind potential sales. Export demand is also problematic due to increased competition from Brazil and tariffs in CHINA. Slowing global economic growth and the increasing likelihood of a recession are further clouding the sector's profitability prospects.

Several factors could impact pork producers in 2024. Feed costs are expected to be contained, but nothing is guaranteed, especially given that Brazil is now the world's largest corn exporter.

African swine fever has not gone away. China and the countries of Southeast Asia have learned to live with this, and large European pork producers (Denmark, Spain, France ) have managed to contain this phenomenon. But the virus could have a significant impact on U.S. pork demand.

The global economy is slowing as higher interest rates begin to bite. About two-thirds of the growth in U.S. pork production over the past two decades has been driven by increased exports. Exports have been and will continue to be a key driver of change. Manufacturers often tend to focus on supply, but demand, both in domestic and especially export markets, has the potential to be an important factor.