LAKEWOOD, Colo. — Last week was a busy one for the hog industry as USDA released the June 1 Hogs and Pigs report, the pork cutout reached above $100 per cwt, and California’s Proposition 12 is slated to take effect after July 1. All hogs and pigs were reported marginally higher (0.1%) to 72.394 million head, which was above pre-report expectations which were expecting a decline of about 0.7%. Hogs kept for breeding were within the range of analysts’ estimates, declining slightly by 0.4% to 6.146 million head. March-May farrowings were down 2.4% to 2.896 million head; this was just below the range of pre-report estimates. Pigs per litter surprised with a significant jump of 3.3% to 11.36. The record pigs per litter led to a 0.8% rise in the March-May pig crop to 32.891 million head. Farrowing intentions for the June-August and September-November periods were both down 3.9% and 4.5%, respectively, which analysts were expecting to be down, but the declines were larger than anticipated. If the trend of higher pigs per litter continues, this may partially offset the lower farrowing intentions indicated from the report.
The pork cutout value has been on a gradual increase since mid-April. Last week, daily values for the pork cutout value reached the $100 per cwt mark, which is the highest value so far for the year and following the seasonal pattern. Gains in the pork cutout have come from rising primal values for the butt, loin, rib, and picnic. The ham primal value continues to track below last year’s levels. The belly primal value has seen improvement in recent weeks but is still well below last year and the five-year average, which continues to weigh on the pork cutout value.
California’s Proposition 12 is set to take effect after July 1, 2023. Starting July 2, fresh pork sold in California must comply with the standards outlined in Proposition 12. An extension to Proposition 12 implementation was issued through December 31, 2023, but this extension only applies to the sale of whole pork meat. The sale of non-compliant pork product in the supply chain by July 1 is allowed to be sold in California through the end of 2023. All pork products harvested after July 1 must be compliant with Proposition 12 to be sold in California.
The second half of 2023 will likely see pork supplies similar to a year ago based on information from the USDA June 1 Hogs and Pigs report. During the second half of 2023, uncertainty will continue regarding California’s Proposition 12, its potential impacts on the hog industry, and possible impacts to domestic pork demand. The looming uncertainty was reflected in the lower farrowing intentions and could lead to lower pork production in 2024 despite the improved productivity seen in the record pigs per litter.
Acreage
The June Acreage report was released by USDA NASS on June 30, 2023 and surprised the market by noting corn acres planted were above 94 million acres, a 2.3% increase from March estimates and 6.2% higher than last year. New record high planted acres occurred in Idaho, Nevada, and South Dakota.
Soybean acres were much lower than March Prospective Plantings, dropping 4.6% from the March estimate and 4.5% below last year. Large declines were seen in Texas (-26.7%) and North Dakota (-13.7%), and Kansas, Wisconsin, Illinois, and Missouri declined more than 5% each compared to the March estimate. Soybean acres planted totaled 83.5 million acres.
Cotton acres slipped from the earlier estimate by 1.5% to just over 11 million acres, which is more than a 19% decline from last year. Compared to last year, declines of over 20% were seen in three of the top cotton-producing states: Texas, Arkansas, and Mississippi. Winter wheat acres were up 11.2% from last year to 37 million acres nationally and just below the previous estimates. Great Plains states of Kansas, Texas, and Colorado all saw double-digit percent increases over the prior year.
The feeder cattle futures market reacted swiftly, adding several dollars to all traded contracts. Nearby contracts rose sharply despite the implication of price being a new crop phenomenon. August and September were both up more than $4 at mid-day on Friday after the report. October 2023 through May 2024 feeder cattle contracts are now over $250 per cwt.
Cattle on Feed
Cattle on feed placements surprised many in May as the number jumped well ahead of the average and range of pre-report expectations. Heading into the report, analysts were expecting, on average, a 1.7% increase over last year’s figure, with a range of 0.1% to 3.6%. The reported number was a strong 4.6% increase and the largest May figure since 2020. Typically, May placements are driven by the Southern Plains wheat pasture cattle moving into feedlots. This year, it was speculated that many of those cattle moved earlier than May given the poor condition of the wheat pasture. State data indicated Texas and Oklahoma placements combined were only 2,000 head under last year. Instead, the large growth areas were Kansas and Nebraska. Kansas increased placements by 3%, and Nebraska increased placements by 14%. Most of the increase heading into Nebraska feedlots clocked in at 800-899 pounds, whereas the increases in Kansas were more evenly distributed across weight groups.
The number of cattle marketed was 1.8% higher than last year leaving feedlots with an on-feed number on June 1 of just under 11.6 million head, about 3% lower than last year. Cattle on feed numbers were expected to decline below 11 million head this summer, but these larger-than-expected placements in May will likely mean a flatter on-feed curve than last year and will hold inventories steady through the low period seen last year.
— Livestock Marketing Information Center
