Analysts expect the USDA to lowers its total inventory of hogs and pigs in Friday’s Hogs & Pigs report, largely due to the impacts of Porcine Epidemic Diarrhea virus (PEDv) on the U.S. pig crop this spring and summer.
According Steve Meyer and Len Steiner in a recent Daily Livestock Report, analysts see the total hogs and pigs inventory as of Sept. 1 dipping by as much as 3.4 percent.
“While the disease appears to have declined below epidemic thresholds at this point, producers continue to deal with the impact of the disease several months ago,” writes Meyer and Steiner. “The baby pigs that were lost then have created a marketing hole that has contributed to a decline of a little over 7 percent to weekly hog slaughter in September, which helps explain the analyst estimate of 6.4 percent decline in the 180 pound and over category.”
One of the key factors to watch in the report is the breeding herd. In June, the USDA surprised analysts after showing a decline in the breeding herd from the previous year, defying expectations of an expanding sow herd.
Meyer and Steiner continue, “But there were reasons that helped explain the decline, with PEDv still a concern and grain prices actually rallying in late April and early May. Holding back gilts back then maybe was not a priority. Cleaning house likely was.”
However, as Meyer and Steiner point, “we are in a very different place today.”
Corn prices are pushing low levels not seen since 2008, and pork profit margins have been the best in decades.
On average, analysts expect the USDA to show a 1.4 percent increase in the breeding herd; however, there is still a big gap among analysts. Some expect the USDA to report a steady breeding herd, while others are expecting an increase as high as 4.7 percent.
“The main challenge for producers looking to retain gilts over the summer was the decline in the pig crop and the fact that product markets were willing to pay such a premium for hogs.” writes Meyer and Steine. “Holding sows for one more round likely was a sound strategy and lower sow slaughter numbers tell the story. Retaining enough gilts to push the breeding herd up 2 percent or more was likely a bit more challenging. But low grain prices were an incentive to do so, hence the disparity among analyst views”
Meyer and Steiner also note that “it is interesting to note that implied gilt retention during the Jun-Aug period last year was particularly low, in part because of producers struggling to deal with the emerging disease. It is likely, this year we will return to a more normal flow.”