Increased pork consumption and lower production costs in most regions are having a direct impact on hog prices, nudging pork producers to start thinking about rebuilding the global sow herd.  While the herd seems to be turning a corner after several months of decline, some regions will be unlikely to rebound, due to herd health challenges and higher regulatory costs, according to the latest RaboResearch report.

“Although there has been some stabilization of the herd and a return to growth in some regions of the EU, especially Spain, it is unlikely the region will ever fully recoup lost production given added regulatory constraints,” notes Christine McCracken, Senior Analyst – Animal Protein at Rabobank and author of the report. “Likewise, production in areas with persistent health challenges may struggle to return to peak production levels. We are seeing growth in parts of North and South America, where costs of production are lower and export opportunities remain ample.”

According to Global Pork Quarterly Q2 2024, improved herd health in the U.S., Canada and China is helping to stabilize production, boosting hog availability.

Elevated global stocks of grains and oilseeds have lowered feed costs for most producer, and an abundant South American crop has added to the inventory – putting additional pressure on prices. However, McCracken notes “growing conditions remain top of mind as the Northern Hemisphere enters the 2024 spring planting season.”

Despite a dip in consumption in key Asian markets during the first quarter of the year, McCracken says pork is maintaining its position as a cost-effective protein choice for consumers worldwide.

“This is particularly significant in light of rising beef prices. The trend toward frozen products and home cooking is expected to continue bolstering retail pork sales, with a projected uptick in value-added and processed meat sales as inflation rates peak,” says McCracken.

Both North America and Brazil have been battling for lost European Union export markets, as the EU is challenged with a decline in pork production and reduced import demand. “Since forfeiting 7% of global pork export market share since 2020, the EU now accounts for less than 40% of total global exports,” McCracken notes.

Given current hog availability in the U.S., McCracken anticipates production should be slightly ahead of year-ago levels through the summer. “Smaller hog supplies drove a rebound in hog prices with the index up 11% year-over-year and June futures topping $106 per hundredweight. This recovery, topped with lower feed costs, will allow most producers to record healthy margins through early Q4 2024. Improved profitability will incentivize production and projected hog supplies will support a 2024 production increase of 1% to 1.5% YOY.”

As for domestic pork demand, McCracken expects it to remain steady, and notes Proposition 12’s impact on pork prices “appears limited, as enforcement has been lax.”

“Pork prices are higher across the board, with strength in hams particularly notable (+32% YOY) on good retail and export demand. Loins, butts and bellies also posted double-digit gains,” McCracken notes. “We expect pork prices to remain high on tight inventories and good exports.”

Rabobank forecasts 6% growth in U.S. pork exports in 2024, with a boost coming in the second half from Asia.

For the United States and the global pork market, Rabobank anticipates a gradual resurgence as the industry limits production growth and reaps the benefits from reduced feed costs and improved consumer demand.