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Coronavirus

What are the real numbers of today's pork industry?

Finishing pigs at a feeder National Pork Board
What should the industry look like going forward? That's the question every producer has to ask themselves, along with understanding the opportunities we have today.

It seems everyone continues talking about pig inventories, whether or not pigs will continue to be backed up and potential capacity issues this fall. I, like everyone else on this topic, do have an opinion and by the end of this year we will have the answers. With that said, I will share my thoughts on where the United States is with inventory numbers and backed up pigs.

According to slaughter numbers, reported by the USDA, the United States processed 27,494,631 hogs between June 6 and Aug. 15. Last year over the same period we slaughtered 26,000,916 hogs or 1,493,715 more this year which is a 5.74% increase. Our estimated slaughter over that period should have been 26,993,972 or 3.8% more pigs in 2020 than the previous year, meaning just over 500,000 hogs were slaughtered over that period than what was projected. However, from the start of the COVID-19 pandemic through May 30, 3 million hogs that should have gone to packers were backed up.

I am not sure there is anyone who can dispute those numbers reported by the USDA and using the Hogs and Pigs Report for expected growth. Where the differing opinions come in is how many hogs made it to a secondary market, were given away or were euthanized. In addition, how many pigs were never placed as farms implemented stricter culling procedures or aborted sows?

My best guess is that as of Aug. 15 we were backed up 2.5 million hogs without taking into account the disappearance scenarios mentioned above. From this, I am assuming 500,000 to 700,000 pigs were euthanized. One thing you have to remember on euthanized pigs: it was very regional and much more prevalent in the Upper Midwest. If all farms in the United States implemented aggressive culling strategies to decrease weaned pigs by 2.5%, that would have a 1.22 million head of hogs impact on inventories over a four-month period, leaving around 500,000 to 700,000 head of excess inventory today.

Next, take into account the secondary market pigs or pigs that were given away. That number could conceivably be below 500,000 head. That would leave us around one day of slaughter backed up. Do I believe this is the number?

I'd like to believe that, but no. It's important to remember that if only 50% of the farms participated in additional culling in the farrowing barn that would add 600,000 pigs back into inventories. It's anyone's best guess, but with those pigs added back into inventories I believe the number to be around 1.2 million to 1.5 million pigs today.

The one area I didn't discount inventories with is the culling of the sow herd. The reason I didn't include any numbers from that is because liquidation has been slow and most sows that were ready to farrow a couple of months ago were likely farrowed. Like I said, only time will tell.

Where do we go from here?
What should the U.S. pork industry look like going forward? I believe that is the question every producer has to ask themselves, along with understanding the opportunities we have today. It was only 14 to 15 months ago we all thought China would be the U.S. pork industry's savior because they had to buy pork. Well, when I started my farm credit career more than 22 years ago the rhetoric then was Russia was going to buy U.S. pork. We all know how that ended.

Looking at China now, they have purchased a lot of U.S. pork, but at what cost? Do we want to continue building a relationship at the expense of our equity? That isn't sustainable. Long term I believe we need to continue to develop our export markets with reliable trading partners and decide how much we want to rely on exports. That too will play itself out, as we all know $70 cutout is not sustainable long term.

Unfortunately, the pace of sow liquidation will do little to push those prices higher. We may see a bump based on the practices mentioned above, but I can tell you that long term, as farmers, you all strive to get better and will not hold back production. The production numbers I see make that very evident.

Steve Malakowsky is a vice president Swine Lending specialist, with more than 22 years of experience at Compeer. For more insights from Malakowsky and the Compeer Swine Team, visit Compeer.com.
 
Source: Steve Malakowsky, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. The opinions of this writer are not necessarily those of Farm Progress/Informa.
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