US pork producers in 2023 see least profitable year on record

It’s no secret that Americans like bacon. In one American survey, more than 20% of respondents said they would be happy eating bacon every day for the rest of their lives. But love only goes so far.

American consumer demand for pork has declined dramatically in recent years. Even if pork prices have fallen in November demand fell further. And pork producers are feeling the blow.

Americans are buying less pork

Pork demand fell about 10% in the third quarter of the same time last year, according to data analyzed in a recent pork industry webinar by Lee Schulz, an economist and professor at Iowa State University. Although pork prices are no longer rising, they remain at historic highs as consumers not willing to pay.

American consumers’ wages also buy it significantly less pork than it did before the pandemic—11% less ham, 12% less pork chops and 6% less bacon, to be exact. This is even with wages rising faster than inflation.

High prices will continue to dampen demand into 2024.

“As we approach 2024, the Meat Demand Monitor continues to indicate that the vast majority of American households are concerned about their finances, and this is weighing on domestic meat demand,” said Glynn Tonsor, a professor of agricultural economics at the Kansas State University, said. Quartz. “I expect these macroeconomic forces to be a headwind for domestic meat demand at least into early 2024.”

Pork producers pay the price

Hog producers are losing money – an average loss of $32 per pig is projected for US pork producers in 2023. That trend will also continue into next year, according to economists.

“Profitability as we look into 2023 and 2024 is potentially going to be the worst two-year stretch ever for pork producers,” said Iowa State’s Schulz.

Last week, Smithfield Foods, the world’s largest pork producer and pork processor, announced that it would conclude 26 of its contracted hog operations in Utah, which employed 210 people.

“Our industry and company are experiencing historically challenging pork production market conditions,” Smithfield President and CEO Shane Smith said in a Dec. 5 statement, citing the industry’s oversupply of pork and weak consumer demand.

Smithfield a pig plant rang in Charlotte, North Carolina and 35 pig farms closed earlier this year in Missouri.

Can Canada and South Korea save the day?

U.S. pork prices remained high thanks in part to growing pork exports. Between 2022 and 2023, export volumes to South Korea and Canadatwo major consumers of American pork, grew 13% and 30%, respectively, according to Schulz.

Meanwhile, exports rose a whopping 89% to Chile, 68% to Guatemala and 59% to the Philippines. Although these countries account for a smaller share of the US pork export market, their growing demand is still notable.

This good news for pork producers is bad news for consumers. Strong exports are part of the reason why prices of pork chops, ham and bacon have remained high at grocery stores.

“[Pork] prices…could be much lower if we didn’t have this supportive overall export market,” Schulz said.

Strong global demand for US pork – particularly from Canada, the Philippines and South Korea – will continue next year, according to Schulz.