Hog slaughter numbers have continued to run higher than anticipated this fall and it is dragging out the potential for losses until next spring, says Chris Hurt, Purdue University Extension marketing specialist.
If all had gone as planned, pork producers would not be facing the largest losses since late 2002, he notes. Back then, producers were losing $25 per hog.
Of course, things did not go as planned. "USDA's September Hogs and Pigs report said slaughter supplies for October and November would be up about 3 percent," says Hurt. "October slaughter was actually up a remarkable 11 percent, and so far November slaughter has been 7 percent to 8 percent higher. Where have all the hogs come from?"
The answer points to sows and gilts that farrowed last spring. USDA cited those farrowings as just 1 percent higher than in 2006. Gains in pigs per litter added another 1 percent to those supplies. Hurt believes there was a major undercounting of sow farrowings and pig inventory dating back to last spring.
"High slaughter runs, pushing past capacity, have forced some Saturday kills and have depressed hog prices," says Hurt. "In September, hog prices averaged about $47 per hundredweight for 51/52 percent lean carcasses on a liveweight basis. Those prices have dropped to $35 in recent weeks."
Of course, some would argue that vaccines to address porcine circovirus associated disease and it's severe mortality and morbidity rates are lending a hand to the current heavy slaughter runs now.
Since slaughter supplies have exceeded USDA numbers for two months now, expectations are that supplies will continue to run higher through year's end and into the winter months.
"This will keep the losses in the high single-digit range through winter until the spring and summer seasonal hog price upswing is realized," notes Hurt. "Given anticipated cash corn prices of near $4 next summer and meal prices near $300 per ton, production costs are expected to be in the low $50 per hundredweight."
He points to the spring and summer months and adds: "Hog prices will not likely average above $50, resulting in losses of $4 to $8 per head."