The year has kicked off with volatility as headlines drive rapid market shifts on an almost daily basis. In this column, I have traditionally focused on providing context around supply and demand fundamentals—how they interact to determine equilibrium prices and, in turn, profit margins for pig farmers.

Demand is always a wildcard, complicated by delayed and sometimes incomplete USDA data. While not impossible to analyze, it is far less straightforward than supply trends. Adding to the uncertainty, shifting tariff policies continue to reshape global trade. Chinese pork imports have declined dramatically over the past four years, reducing U.S. market share in what was once a much larger opportunity. Meanwhile, trade relations with Mexico and Canada remain uncertain, and the prospect of new reciprocal tariffs raise fresh concerns about future market dynamics.

While it’s easy to get caught up in the noise of political rhetoric and social media speculation, it is important to step back and focus on the big picture. With demand uncertainty looming, let’s take stock of what we do know: current supply conditions and the profit margin outlook for the next 12 months.

Pork Production

Year-to-date hog slaughter is down 3.7 percent. Carcass weights are an interesting data point through the first quarter. Producer sold carcass weights are about 3-4 pounds heavier than a year ago. Packer owned weights have largely been lower than a year ago and several pounds below levels witnessed in 2022 and 2023.

Figure 1. Producer Sold Carcass Weights

Figure 2. Packer Owned Carcass Weights

When we combine these factors together, pork production year-to-date is 3.4 percent lower. This represents a larger pullback than the 1.0 percent reduction implied in Q1 by the latest WASDE report but that can be attributed to fewer slaughter days this year. Once that is taken into account, production is close to USDA’s current forecast and has been supportive of cash hogs.

Canadian Imports

The U.S. imported 6.7 million head of swine from Canada in 2024. This was the highest level of Canadian hog imports since 2008. The majority of these animals come in as feeder pigs (70 percent of total) followed by finished barrows and gilts (23 percent of total). The balance is a combination of slaughter sows and barrows and breeding stock. The threat of tariffs on Canadian products entering the U.S. has caused consternation on the availability, price point, and future flow of these animals. Year-to-date, Canadian feeder imports are 4.1 percent higher. Whether demand was pulled forward to attempt to avoid more costly pigs or this is a trend to continue is unclear. It is worth noting despite larger-than-normal feeder imports so far this year, the cash market and futures curve continue to find support.

Figure 3. Monthly Canadian Feeder Pig Imports (Weekly Average)

USDA Supply and Demand Estimates

The monthly WASDE estimates provide a timely balance sheet on major commodities, including pork. The March WASDE lowered annual pork production from the previous report, but subsequent reductions may occur based on the current rate of production. Imports and exports were also reduced from the previous month. All told, this resulted in a net reduction in total domestic pork use of 85 million pounds.

Perhaps more interesting is the reduction in 2025 per capita disappearance from 51.4 pounds per capita in the February report to March’s 50.7 pounds. This is relatively similar to average levels over the past 20 years and indicates that there is not an increased onus placed on the domestic consumer for now. This could certainly change in coming weeks as trade flows (lack thereof) impact the amount of meat on the domestic market. This is also set against the backdrop of record broiler production (11.7 percent higher year-to-date) and record per capita disappearance. While pork retail prices are currently at a competitive position relative to retail broiler prices, this could be a headwind should the expected record broiler production take further market share in the retail space.

Figure 4. WASDE Red Meat and Poultry Per Capita Disappearance

The USDA released its quarterly Hogs and Pigs report on March 27, showing a total hog inventory of 74.5 million head as of March 1-slightly lower than a year ago. Both breeding and market hog inventories declined compared to last year and fell short of analysts’ pre-report estimates. Continuing a familiar trend, the December–February pigs per litter metric set another record high. Farrowing intentions for the next two quarters are projected at or slightly below year-ago levels, with no clear signs of expansion or contraction. Overall, the report was relatively supportive of the market, suggesting the industry has reached a tentative equilibrium.

Figure 5. March 2025 Hogs and Pigs Summary

Margin Outlook

While analyzing individual market reports and trends is valuable, it’s essential not to lose sight of the big picture. Based on current data, supply levels appear adequate for now. Predicting future demand, particularly for exports, remains challenging. Ultimately, the focus should be on profit margins and whether current opportunities are worth protecting.

Each producer has unique costs, pricing mechanisms, and risk tolerance. However, the margin outlook remains historically strong. Margins over the next four quarters for a demonstration hog operation are in the 95th percentile of profitability over the past decade. This presents a rare opportunity to secure favorable margins and mitigate risk. Statistically speaking, this is a historically rare opportunity to protect favorable margins and take at least a portion of risk off the table.

Figure 6. Rolling 4 Quarters Margin Chart

While not a focus of this article, market attention is beginning to focus on crop size potential and planting progress across the Midwest. Feed costs can change dramatically over the next several months, as corn and meal prices have a seasonal tendency to increase between now and summer. It may be prudent to attack both legs (hogs and feed costs) of the margin equation to take advantage of what the market is offering by layering into flexible coverage to maintain opportunities to better margin outcomes, should they occur. Contact us to learn more about strategies to take advantage of what the market is offering and take control of your bottom line.