In-Depth: Pork Has the Fundamentals. Where Is the Payoff?

On paper, the U.S. pork market should be in a stronger position.

Feed costs remain relatively low. Hog producers have logged roughly two years of profitability, by one long-running industry measure. Pork production is growing only modestly. The breeding herd is near its smallest level in more than a decade. And record-high beef prices would seem to offer pork an opening with consumers looking for a more affordable protein.

Yet the expected payoff has been elusive.

Pork packer margins have spent much of the spring and summer under pressure, while hog and wholesale pork prices have failed to respond as strongly as the supply picture might suggest. Several pork primals have struggled even during periods of relatively light slaughter.

For Texas A&M livestock economist David Anderson, who discussed the market at the Southwest Meat Association convention in Galveston, Texas, the disconnect is difficult to reconcile through supply alone.

“Hogs and the pork side of things often baffles me,” Anderson said. “We continue to have profits on the production side, but we don’t have any expansion of production going on.”

Kansas State University agricultural economist Glynn Tonsor sees another piece of the puzzle on the other end of the supply chain: Consumers simply are not switching among proteins based on price as readily as they once did.

“The setting is favorable,” Tonsor told Meatingplace. “And I think the typical hog producer would say they’re a little frustrated that they haven’t benefited more from that setting.”

The result is a pork market caught in an unusual position. Producers have little incentive to contract, but not enough incentive to expand. Packers face excess processing capacity and difficult margins. Consumers say they want more protein but have not shifted toward pork as aggressively as high beef prices might suggest.

And the industry increasingly finds itself asking a basic question: What will it take to turn favorable fundamentals into stronger pork demand?