Pork Profit Maximizer – Retail Edition

February 18, 2019

So far pork supplies have far exceeded expectations. Following the release of the December ‘Hogs and Pigs’ report, we estimated that pork production in the first quarter of 2019 would be 1.9% higher than the previous year. It is important to note that there was an extra day in Q1 of 2018 and when adjusting for this growth in Q1 of 2019 calculates to be 3.5% higher than last year.

But halfway through the first quarter pork production appears to be well above that target. There are two components to the pork production number: the number of hogs coming to market and hog weights. Both those numbers have exceeded expectations. Weekly hog slaughter in the first seven weeks of the year was 4.5% higher than a year ago and about 2 points higher than what was expected based on the inventory survey.

We think hog weights during this period were about 1% higher than a year ago despite USDA estimates that still have weights under a year ago. USDA-AMS has started to revise those weight estimates with actual data from NASS and in the first two weeks of this year, hog weights were 0.9% higher than a year ago.

The combination of higher slaughter and higher weights implies pork production running about 5.5% above year-ago levels. If we continue on this trend, this would imply quarterly pork production (with one less marketing day) that is up about 3.4% compared to a year ago. But leaving aside the marketing day differences, the reality is that pork packers have had to deal with a +5% jump in supply availability over the already record numbers we saw a year ago.