Pork producers and industry watchers need to pay attention this Friday– June 29– as USDA releases its quarterly Hogs and Pigs Report conducted on June 1. Ron Plain, University of Missouri agricultural economist is looking for both breeding herd and market hog inventories to be 1 percent higher than last June's levels.
The U.S. breeding herd tends to increase in size from March 1 to June 1. During the past eight years, Plain points out, that increase has averaged 112,900 females. "I am predicting a smaller-than-normal increase of 46,000 head from USDA's March 1 breeding herd number of 6.244 million," he notes.
He points to two factors for his breeding-herd growth estimate. One is his colleague's, Glenn Grimes, gilt-slaughter data, which shows a shortage of females in the barrow/gilt slaughter mix. That usually means gilts are being held back for the breeding barn. Second is the fact that pork producers have been enjoying profits for several months (primarily due to cheap feed). Having recovered from losses of 1998/99, and the current strong market, is making the appeal of adding a few extra sows to breeding herds simply too tempting to resist.
Of course packer capacity limitations still present plenty of room for caution as 2002 approaches, and any expansion would begin on top of an already high production base. "I believe we saw the low in this cycle with last year's slaughter numbers," says Grims. He cautions that anything more than a 2 percent growth from this year's level would be too much for the market (specifically packer capacity) to handle.
Ahead of USDA's upcoming report, Plain estimates quarterly faworrowings at: March-May 101 percent, June-August 102 percent and September-November 103 percent compared to this time last year.
USDA's last two monthly reports have suggested a slight decline in the U.S. breeding herd. The last quarterly report (released in March) showed the sow and gilt inventory at 6.065 million. But the April monthly report pegged it at 5.999 million head, with a 5.986-million-head estimate in May's monthly survey. "Continuing this trend would yield a June 1 breeding herd roughly 1 percent smaller than a year ago," says Plain. "Given continued attrition of small hog farms and the lack of new construction, a 1 percent smaller breeding herd is a possibility. So, either my estimate is too high or USDA needs to revise some of its past numbers."
Plain looks for the market-hog weight groups to break out as follows: hogs weighing 180 pounds and higher, 100 percent; 120 to 179 pounds, 101 percent; 60 to 119 pounds 102 percent; and hogs less than 60 pounds, 102 percent of June 2000 levels.
If that scenario unfolds, Plain says hog slaughter for the second half of 2001 will exceed last year by 2 percent. In 2000, terminal-market, live-hog prices averaged $41.21 per hundredweight for the last half of the year. "Given the current strong pork demand picture, I'm expecting July to December 2001 hog prices to come in close to year-ago levels, even with more hogs to slaughter," he says.
Looking ahead to 2002, Plain expects commercial hog slaughter to approach 102 million head, which would be a record. "Although there might be sufficient demand to move that much pork, I'm not sure there will be adequate slaughter capacity to handle that many hogs without some very low hog prices in the fourth quarter of 2002," says Plain.
Does that mean $8-hogs could return? It's a possibility if hogs backup because of overburdened packing plants. Certainly unprofitable prices will dominate. "The best way out of this potential problem is for the breeding herd to stay under 6.3 million head," concludes Plain.