The U.S. swine herd is the largest of record for this time of year. USDA's March inventory survey put the swine herd at 77.629 million head, up 4% from a year ago and only 1.3% below the modern herd record set in December 2019. The swine herd has grown each year since the porcine epidemic diarrhea virus cut production in 2014.
The table below shows the March 2020 hog inventory as a percent of the March 2019 inventory, both for the average of pre-release trade forecasts and for the USDA Hogs and Pigs survey.
The USDA survey matched the trade forecast average for pigs per litter (102.8%) and market hogs weighing 120-179 pounds (103.9%), but nothing else. USDA's market hog inventory (104.3%) is larger than the trade expected (103.5%) and the breeding herd is one percentage point smaller than the trade expected.
The biggest difference between the USDA report and the trade forecast is for summer 2020 farrowings. USDA said farrowing intentions for June-August are down 4.3% while the trade average predicted a 0.5% increase in summer farrowings.
The USDA market hog inventory indicates hog slaughter will be well above the year-ago level for the next six months. Preliminary slaughter data indicate March commercial hog slaughter will total 11.9 million head, up 11% from a year ago, and due in large part to one extra week day. On a weekly basis, March hog slaughter was up roughly 8%.
As you can see from the chart below, 2020 hog slaughter has been moving higher at a time of year when the trend is usually down. Over the next eight weeks, weekly hog slaughter should decline by 100,000 head or more.
USDA's estimate of the number of market hogs weighing 180 pounds or more on March 1 was 106.5%. The lighter weight market hog groups imply April slaughter will be up 4.8%, May slaughter up 3.8% and June-August up 3.9% compared to the same periods in 2019, more or less.
Pigs per litter averaged 11.0 head during the winter quarter, up 2.8% from December-February 2018-19. Pigs per litter has been between 102.8% and 103.6% of a year ago for each of the last four quarters.
The number of sows farrowed during December-February was up 1.9%. With pigs per litter up 2.8%, the December-February pig crop was up 4.7% of last year. Despite the December-February pig crop being 104.7% of a year ago, USDA said the inventory of pigs weighing less than 50 pounds on March 1 was only 104.0% of last year. The reduction in weaner pig imports from Canada can explain part of this discrepancy.
March-May farrowing intentions are down 0.4%. If pigs per litter are up 2.5% (for example), then the spring pig crop should be up 2.1%, giving us the smallest increase in hog slaughter since the third quarter of 2018.
June-August farrowing intentions are down 4.3%. If, for example, pigs per litter are up 2.5%, the summer pig crop should be down 1.8% which means December-February hog marketings would be less than a year earlier and thus less than slaughter capacity. This is very good news as continued growth in the pig crop could result in hog marketings exceeding slaughter capacity.
I will mention that I'm skeptical about the big drop in farrowing intentions. Monthly hog profits have been small or negative during the last six months, which is certainly a reason producers would reduce matings. But for most of that time, the futures market has indicated a big jump in hog prices was just around the corner. Did producers really make a big cut in the sow herd in the face of expected profits?
Daily hog slaughter during December-February was up 5.8%. This was a half point higher than the 5.3% increase indicated by the heavy weight market hog inventory in the December Hogs and Pigs report. March daily slaughter is up nearly 8% which, is far above the 1.7% increase implied by the December pig report. Therefore, USDA made several revisions to previous inventory reports. USDA increased the estimated number of sows farrowed last summer by 3.0% and increased fall farrowings by 2.6%. They left pigs per litter unchanged, so the summer and fall pig crops increased by the same percentage as farrowings. The larger pig crop was needed to match up with hog slaughter in recent months. USDA increased the September market hog inventory by 1.4% and the December market hog inventory by 1.8%.
In recent weeks slaughter weights have been close to year ago levels. This may indicate producers have been pushing hogs to slaughter a bit sooner.
If USDA's numbers are correct, 2020 commercial hog slaughter should total nearly 135 million head, up 3.9% from last year's record.
The record for one day hog slaughter is 499,676 head processed on January 14, 2020. Seasonally, hog slaughter is usually declining at this time of year. But we have had four days with slaughter of 498,000 head in the last two weeks. Slaughter was 2.79 million for the week ending on March 21, the third highest week ever.
As with most parts of the economy, the big uncertainty for pork producers is how the coronavirus will impact the industry. Hog slaughter plants have been operating at very close to capacity. Anything that slows slaughter (sick workers or heaven forbid, sick inspectors) could quickly lead to hogs being backed up on farms. If that happens hog prices could approach zero, as they did in December 1998.
Meat demand has been strong in recent weeks as consumers have stockpiled food in anticipation of the need to shelter in place to avoid coronavirus. Domestic demand for pork, beef, chicken and turkey were each higher in February and are likely to be up when we get the data for March. However, as more people shelter in place, food purchases are likely to slow. Certainly restaurant/food service meat sales should drop.
Pork exports to China have driven export demand in recent months. Pork production in 2020 is expected to be record high for the sixth consecutive year. Foreign markets will need to absorb much of that growth.