Glenn Grimes and Ron Plain, University of Missouri agricultural economists, sent a letter via fax to large hog producers. The letter encourages producers to pull marketings forward three to four days into the third from the fourth quarter. Here is the letter the economists sent:
Hog slaughter for the last nine weeks has been up over 5 percent from 2001. This increase has been 2.5 times the increase expected based on the March USDA Hogs & Pigs report.
We keep hoping – in fact praying – that this is some kind of marketing glitch, but over two months overrun is most likely to be an increase in production.
If October, November and December slaughter is as much larger this year over 2001 as the last nine weeks has been compared to a year earlier (up 5 percent), commercial slaughter for these months will be about 27.8 million head. This would be over 200,000 head more than in the fourth quarter of 1998.
How low hog prices would be pushed with this many more hogs than slaughter capacity is not predictable but would likely be as low as in 1998.
Even though most of the pigs have been born that will be marketed in the fourth quarter, there is still something that all hog producers can do to at least minimize the potential for extremely low prices in the fourth quarter of this year.
If all producers will speed up marketings by 4 percent to 5 percent during July, August and September, it will pull two to three days slaughter from the fourth quarter into the third quarter. To get maximum impact, marketings in the fourth quarter would need to be slowed by the same 4 percent to 5 percent.
Pulling slaughter forward two to three days should pull average weights down 4 pounds to 5 pounds by the end of the period and should not result in discounts for light weights.
If most producers will speed marketing 4 percent to 5 percent for the third quarter, the slow down 4 percent to 5 percent in the fourth quarter, it should pull at least two days slaughter from the fourth quarter into the third quarter. This would result in a slaughter of about 27 million head in the fourth quarter, which would only be 2 percent above last year and consequently much more manageable with current slaughter capacity.
We hope this information will be beneficial to you.
Glenn Grimes and Ron Plain, University of Missouri agricultural economists