In a U.S. animal-protein market environment now dominated by upside feed-price risk, the Quarterly Hogs and Pigs report released by USDA on Dec. 27, showed lower swine inventories and lower farrowing intentions for the first half of 2011. At a minimum, lower inventories and farrowing intentions indicate a degree of caution on the part of pork producers regarding how profitability might be affected by higher feed costs.
The report indicated that the Dec. 1 inventory of market hogs was 0.83 percent lower than a year ago. The report also indicated that producers have pared back breeding animal numbers compared with a year earlier—Dec. 1 inventory of breeding animals was 1.23 percent lower than on Dec. 1, 2009.
The lower breeding inventory, combined with estimated year-over- year higher fourth-quarter sow slaughter, suggests that some producers have responded to higher corn and soybean meal prices by reducing breeding numbers, thereby limiting exposure to the lower returns.
The report also showed lower producer farrowing intentions for the first half of 2011. The second set of producer intentions for the December-February quarter indicates that farrowings will be about 1 percent lower than a year earlier. First intentions for the March-May quarter are 2.25 percent below the same period last year. Combined producer intentions in the December report indicate that first-half 2011 farrowings could be about 1.4 percent lower than in the same period last year.
While smaller breeding animal inventories and lower farrowing intentions often translate into lower pig crops, continued gains in sow productivity are expected to largely offset lower farrowing numbers in 2011. Moreover, continually improving swine genetics and enhanced nutrition management practices are expected to continue to move average dressed weights slightly ahead of last year’s estimated average of 203.5 pounds per carcass.
Hog weights are expected to average slightly ahead of last year’s average, although recent weight increases are not expected to be sustained through the year. This year’s commercial pork production is expected to be 22.5 billion pounds, about half a percent higher than production in 2010.
Source: USDA - ERS