Pork features were twice as frequent on restaurant menus while beef entrees took second billing due to sky-high prices this July 4th weekend. Those were among the observations after casting an informal restaurant survey during the Fourth of July holiday throughout Door County, Wisconsin’s premier tourist destination. Located in Wisconsin’s peninsula that extends into Lake Michigan, Door County boasts over 300 miles of picturesque shoreline. Its winter population of some 30,000 people swells in summer as 2 million tourists descend upon its many high-end restaurant options.

Door County’s restaurant menus provide a clear window into beef and pork’s fortunes. While both categories are facing historically high feed costs, pork is plagued by strong inventories while U.S. beef production has seen the largest annual decline since 1979. That’s according to United States Department of Agriculture (USDA) data. There seems to be no near-term change on the horizon for beef. USDA has projected beef production will fall 4.2% this year and decline another 8.4% next year as the beef cow herd continues to shrink in numbers due to widespread drought and high feed costs.

As a result, cattle futures are topping highs previously set in 2014 as August 2023 live cattle futures closed at $1.75 per pound at the close of July 5 trading on the CME. These prices are up over 30% from the same time last year. One local dairy farmer just shipped a late lactation Holstein that weighed 1,895 pounds and netted over $2,000 for the cow. Indeed, meat packers are economically enticing dairy producers and cattle ranchers to send cattle to slaughter.

Pork’s profit squeeze

While the cattle prices are covering the added feed costs, the same cannot be said for pork. That industry is hemorrhaging money.

“In Iowa, where hogs outnumber people, farmer Dwight Mogler said he is losing about $30 to $40 on each pig he produces, and he hasn’t been able to make a profit so far this year,” wrote The Wall Street Journal’s Patrick Thomas in his article, “America has too much pork.”

Bloomberg quoted even larger losses. “It’s a sign that producers will soon take steps to shrink their herds, with growers losing as much as $80 a head,” said Shane Smith, chief executive officer of Smithfield Foods. “Demand from top buyer China is waning as the cost to feed animals is surging,” wrote Michael Hirtzer in his article, “Hog herds to shrink as U.S. farms lose money.”

At the close of July 5 trading on the CME, August lean hogs traded at 97.45 cents per pound and December lean hogs netted a much lower 75.75 cents per pound.

For pork, there doesn’t appear to be a near-term recovery in sight. USDA projections suggest that hog inventories and frozen meat reserves could remain high through early 2025.

That being the case, restaurants across the country, including those in Door County, will continue to feature more pork tenderloin and a little less filet mignon.

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(c) Hoard's Dairyman Intel 2023
July 6, 2023

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