Pork producers show agility throughout the unexpected

The pork industry simply cannot afford to repeat the depopulation and growth reduction of finishing pigs in the future.

Kent Bang Compeer Financial, Vice President of Swine Lending

September 15, 2020

3 Min Read
Pig barn
National Pork Board

It has been about seven months since the United States started feeling the impacts of COVID-19. The country has yet to fully understand the impacts of shutting down this economy and what the post-COVID economy will look like.

The meat industry continues to feel the pain of employee issues at plants. This has kept the industry from fully capitalizing on value that reaches the live animal sector. The foodservice industry is beginning to ramp up from the shutdown, which should begin to help. Recovery has been much slower than we had hoped.

Pork producers have shown how agile they can be. Live hog production in the United States totaled 74,887,800 head year-to-date through July, an increase of 1,512,700 head (2.1% over 2019). Producers have reduced inventory and breeding targets. This inventory management strategy has reduced the number slaughtered year-to-date, but will likely have the biggest impact through the rest of the year.

The industry has been in a retraction mode for most of 2020 and will likely continue given the uncertainty of prices as of today. My expectation is that we will finish 2020 with 2.0% higher slaughter numbers than 2019 and likely reduce supplies for 2021 if the sow slaughter continues.

Pork exports from the United States have been very strong year-to-date. In spite of tariffs on U.S. pork to China, exports to China and Hong Kong are up by 366,542 metric tons compared to the same time period in 2019 (January-July). Exports to that region slowed considerably in July, but news of a positive African swine fever test in Germany will impact China and South Korean imports immediately.

The pork industry on average, has suffered substantial impacts from COVID-19 and recovery will take some time. Packers are unable to convert as much product to case-ready due to lack of workers, in addition to costs associated with keeping employees safe and working. All this with somewhat lower daily volumes due to short staff and paying to run Saturdays through much of the year.

Producers have taken a much larger hit with pigs that could not get to market, with higher costs to slow their gain and a hold until markets could catch up, and much lower revenue as negotiated markets took the brunt of the impact.

Being agile in the future is going to require us to understand what our packer can handle as far as slaughter numbers. We as an industry simply cannot afford to repeat the depopulation and growth reduction of finishing pigs in the future. Because we had moved so many pigs to slaughter during our normal seasonal low (June, July and August), our markets never saw a summer rally. History indicates that is the period we make a good share of annual profits. This will likely make the recovery slower for the industry.

Source: Kent Bang, 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.

About the Author(s)

Kent Bang Compeer Financial

Vice President of Swine Lending, Compeer Financial

Kent Bang serves as the vice president of Swine Lending at Compeer Financial. He has more than 35 years of experience in the swine industry, with the last 20 years spent financing large commercial swine production and pork processing. Prior to that time, Bang consulted clients across the United States in production, finance and nutrition for two leading feed companies. Bang graduated from the University of Nebraska with a bachelor’s degree in animal science and ag business.

Bang has been active in the swine industry as a long-time member of the Pork Alliance and currently serves on the board of directors for the National Pork Producers Council. He and his wife, Julie, live in Omaha, Neb., and have two adult sons.

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