Markets Jump on Skyrocketing Hog Inventory

This is highest June 1 inventory since estimates began in 1964.

( Jo Windmann )

Updated June 27, 2019, 5:02 pm. 

There’s no questioning the volatility in the hog complex as we consider all of the internal and external factors on prices—from lower exports and disease challenges to higher feed and grain prices. Still, nothing bearish jumped out of the latest USDA’s Hogs and Pigs report, according to analysts.

Total inventory of hogs and pigs on June 1, 2019, was 75.5 million head, up 4% from June 1, 2018, and up 1% from March 1, 2019. This is highest June 1 inventory since estimates began in 1964.

Breeding inventory, 6.41 million head, was up 1% from last year and up 1% from the previous quarter.

Market hog inventory, 69.1 million head, was up 4% from last year, and up 1% from the previous quarter.

Download a PDF of the latest USDA Hogs and Pigs report here.

Looking at the weight breakdown of market hog inventory, of particular note was the 7½% increase in the number of pigs in the 180-lb. and over category compared to year ago levels, said Lee Schulz, associate professor of agricultural economics, Iowa State University. The number was three percentage points higher than pre-report expectations.

“When we dig back into where the revision showed up, I think it shows why such a larger 180 lb. and over [number]. The December 2018-February 2019 pig crop was increased 1.3% from the previous report. That's about 428,000 pigs more. And that came about because of more sows farrowing,” he said. “That collectively contributed to a lot larger 180 lb. and over [category]. I think that very much matches the 9% increase in slaughter we've seen here in November. We are now accounting for those hogs.”

Average analyst estimates put total inventory at 103% of last year as of June 1, reported Allendale, Inc. on AgWeb. Sows kept for breeding was estimated to be at 102.1% and kept for marketing at 103.1%.

Sow Herd Projections

The March-May 2019 pig crop, at 34.2 million head, was up 4% from 2018. Sows farrowed during this period totaled 3.11 million head, up slightly from 2018.

The average pigs saved per litter was a record high 11 for the March-May period, compared to 10.63 last year. This is 3.5% higher and certainly one of the numbers market analysists were surprised by.

“When you look at Indiana, Kansas, Minnesota, Missouri, North Carolina, Pennsylvania, Texas, all with growth in excess of 4/10ths of a pig relative to the year ago, it certainly suggests to me that some of the disease issues that we've seen in the industry are becoming better controlled, PRRS being one that sticks out,” said Scott Brown, University of Missouri economist.

The other surprise, Brown said, is looking at breeding inventory for June 1 on a state-by-state basis. Iowa was down 40,000 head, with Minnesota and North Carolina also being lower. “But those declines are being outweighed by what happened in states like Illinois, Missouri, Nebraska, South Dakota. And the “other” state category was also up 25,000 head,” Brown said. “To me, that could suggest some increasing growth ahead.”

In total, U.S. producers intend to farrow 3.18 million sows during the June-August 2019 quarter, down slightly from the actual farrowings during the same period in 2018, but up 3% from 2017.

Schulz added this softening does generally align with current profitability projections from moderate prices and higher costs.

Intended farrowings for September-November 2019 at 3.17 million head, are up slightly from the same period of 2018 and up 2% from 2017.

Previous Report Coverage:

March 28, 2019: Massive Pork Supply Comes as No Surprise in Hogs and Pigs Report

Dec. 20, 2018: Max Supply & Trade Turmoil Underlies December Hogs and Pigs Report