A very bullish September ‘Hogs and Pigs’ report

National Pork Board Finishing hogs inside a curtain-sided barn
Hog slaughter during next three quarters should be below the year-ago level. 

USDA’s September “Hogs and Pigs” report was bullish. The report said the U.S. swine herd on September 1 totaled 75.352 million head. That is 3.9% smaller than a year ago and the smallest September inventory since 2018. The hog inventory is 2.2% points smaller than the average of pre-release trade expectations. The most bullish USDA number was summer farrowings, pegged at 6.56% lower than last year.

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Table 1 shows this year’s September hog inventory as a percent of a year earlier for both the average of pre-release trade forecasts and for the USDA “Hogs and Pigs” survey. The inventory numbers indicate hog slaughter during the next three quarters should be below the year-ago level. 

Ron PlainRon Plain table 1 HP.png

The report contained an unusually large number of revisions to past estimates. The good news for producers is that all but one of the revisions to quarterly data were reductions.

To match inventory with subsequent slaughter, USDA lowered the December market hog inventory by 90,000 head (0.1%). They followed through and decreased the September-November pig crop by 99,000 head (0.3%) and decreased September-November 2020 farrowings by 10,000 litters (0.3%). 

USDA lowered the March market hog inventory by 1,090,000 head (1.6%) and the June market hog inventory by 1.8%. This led to a decrease in the December-February pig crop of 1,292,000 head (3.9%) and a decrease in December-February 2020-21 farrowings by 119,000 litters (3.9%).

In the September report, USDA estimated June-August farrowings at 3.046 million litters which was 69,000 litters (2.2%) fewer than the June farrowing intentions. They decreased the farrowing intentions for September-November to 3.000 million litters which is 84,000 (2.7%) below June’s estimate of intentions.

The most bearish numbers in the pig report were December-February farrowing intentions (up 1.4%) and pigs per litter (up 0.6%). Pigs per litter during June-August averaged a record 11.13 head, breaking the old record of 11.11 head set in June-August 2019.

Ron Plain PPL 9.21.png

The first check on the accuracy of a quarterly “Hogs and Pigs” report is the relationship between recent hog slaughter and the heavy-weight market hog inventory on September 1. The heavy-weight market hog group on September 1 was 1.3% smaller than last year implying that September and early October hog slaughter would be down 1.3% year-over-year. Preliminary data indicates September hog slaughter is actually down a bit over 2%. I believe October hog slaughter will be lower than the 1.4% reduction that the market hog inventory implies. If I’m right, USDA’s heavy-weight market hog inventory may be a bit high.

As the next chart shows, hog slaughter this year typically has been below last year’s level, with the exception of several weeks in the spring when 2020 hog slaughter was extremely low due to COVID among slaughter plant workers. Weekly slaughter in 2021 has stayed above the five-year average of 2015-19. I expect that to continue through the rest of 2021.

Ron Plainron plain hog slaughter 9.21.png

Weekly slaughter is not likely to reach the level of the second half of 2020. The third quarter is nearly over and slaughter is down roughly 6%. The market hog inventory weight groups imply fourth quarter hog slaughter will be down 3% year-over-year.

Table 2 shows actual quarterly commercial hog slaughter and Iowa-Minnesota negotiated carcass hog price for 2020 and the first half of 2021. It also shows my forecast for hog slaughter and hog price for the rest of 2021 and for 2022. Commercial hog slaughter in 2020 was a record 131.6 million head. If USDA’s numbers are correct, production trends continue, and hogs are marketed on a timely basis, then 2021 hog slaughter is likely to be roughly 129.2 million hogs, down 1.8% compared to 2020. Hog slaughter in 2022 would be slightly lower, perhaps 128.7 million head, down 0.4%.

Ron PlainRon Plain Table 2 9.21.png

The Iowa-Minnesota negotiated carcass price series started the year at $54.00/cwt., peaked at $134.41/cwt. on June 18 (just 58 cents below the record of $134.99/cwt set on July 14, 2014) and was $76.22/cwt last Thursday. I expect it to average $77/cwt. during the rest of 2021.

Ron PlainRon Plain barrow and gilt 9.21.png

Fewer hogs usually bring higher prices. The key is timely slaughter and strong pork demand. U.S. pork exports were record high in 2018, 2019 and 2020. Through the first seven months of 2021, U.S. pork exports were down a slight 0.2%. Both domestic and export demand will need to continue to be robust for producer profits to remain in the black trough 2022.

Sources: Ron Plain, who is solely responsible for the information provided, and wholly own the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

 

 

 

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