The US pork industry is currently experiencing a paradox of productivity, according to Christine McCracken, Senior Analyst for Animal Protein at Rabobank.
While producers have successfully increased the number of pigs raised per sow, leading to fuller barns, this has inadvertently applied downward pressure on the pork market.
During a discussion on AgriTalk with host Chip Flory, McCracken expressed that the industry is grappling with sustained zero or negative margins, a trend she anticipates will persist into 2024.
The turnaround for such a vast industry is slow, likened to turning a large ship, indicating that recovery and adjustment may be a prolonged process.
Despite a brief uplift in pork prices earlier in the year and a positive outlook for the autumn’s crop yield providing some respite for producers, McCracken voiced concerns over the current lack of transparency, particularly around soybean meal, a key component in animal feed.
Inflation: A Persistent Challenge
Inflation remains a significant challenge for the pork sector. McCracken noted that despite a decrease in wholesale pork costs, such as a 20% drop in the price of pork bellies, consumers are not seeing a corresponding reduction in retail bacon prices.
This discrepancy suggests that pork and chicken are being used to balance the higher beef prices, maintaining a demand resilience that Flory highlighted.
McCracken predicts that the affordability issues may become more apparent to consumers as other living costs, such as rent and car payments, continue to rise.
The post-holiday period could see a slowdown in meat sales, although current volumes are exceeding expectations.
Looking Ahead to 2024
The onset of 2024 is expected to be challenging for the pork industry, with profitability remaining elusive. However, McCracken pointed out that product movement is steady, and inventory build-up is not a concern, signalling a healthy demand.
One aspect to watch is the impact of Proposition 12, which could affect sales into California as enforcement tightens towards the year’s end.
Additionally, the recent weakening of the US dollar may make US pork more affordable internationally, potentially influencing exports.
Despite the immediate hurdles, McCracken maintains a long-term optimism for the pork industry. She acknowledges the dual nature of the current productivity levels as both an advantage and a challenge.
The ability to produce more with fewer resources is a positive narrative for sustainability. The industry’s focus, she suggests, should be on navigating the short-term cycle while keeping an eye on the future.
