U.S. Hog Inventory Points to Record Year Ahead

( National Pork Board and the Pork Checkoff )

U.S. producers are poised for a record year for pork production in 2020. According to the December Quarterly Hogs and Pigs Report, breeding inventory numbers came in at 6.46 million head, up 2% from a year ago and up slightly from last quarter

According to USDA’s count of all hogs and pigs on Dec. 1, 2019, total inventory was 77.3 million head, up 3% from a year ago but down slightly from Sept. 1.

The market hog inventory on Dec. 1 was 70.9 million, up 3% from 2018 but down slightly from the previous quarter.

The September through November 2019 pig crop, at 35.1 million head, was up 2% from 2018. The number of sows that farrowed during this three-month period was down 1% from 2018 at 3.17 million head, which represents 49% of the breeding herd. The average pigs saved per litter was a record high of 11.09, compared with 10.76 last year. 

Economists shared their reactions following the Dec. 23 announcement of the December Quarterly Hogs and Pigs Report in a teleconference funded by the Pork Checkoff.

A record 2020 ahead
Altin Kalo, senior analyst with Steiner Consulting Group in Merrimack, N.H., points out the Hogs and Pigs Report gives the industry a view of the supply outlook for next year. 

“One of the things that will determine what the supply is for next year is the size of the breeding herd. More sows on ground Dec. 1, chances are you’ll get more hogs down the road,” Kalo says. 

With record hog slaughter in two of the past three weeks, will we see more hogs this time next year?

“If you look at the size of the breeding herd right now, the answer to that question will be yes,” Kalo says. “The breeding herd based on the survey on Dec. 1 was 6.461 million hogs, about 30,000 sows more than it was on Sept. 1, and 135,000 sows more than it was this time last year.”

He says that growth has come from some of the larger hog-producing states, but not the largest.

“The biggest growth came from Illinois. When you look at Iowa, the breeding herd was actually down slightly and North Carolina’s breeding herd was unchanged,” Kalo says. “This increase in the breeding herd will underpin supply growth for the second half of next year and will set us up for another record year in 2020.”

Pigs per litter is still seeing some soft yet strong growth that is fairly in line with pre-report estimates, says Tyler Cozzens, agricultural economist with the Livestock Marketing Information Center in Lakewood, Colo.

“This is continuing that upward trend of pigs per litter, which I think is a good sign,” Cozzens says. “We are seeing those efficiency gains translate into a bigger pig crop, which is pushing total hog and pig numbers up that 3%. That’s driving the growth we are seeing in industry.”

Expansion and full plants
When the news that African swine fever (ASF) struck China in August 2018, the numbers show U.S. pork producers started expanding, says Bob Brown, president of Bob Brown Consulting in Edmond, Okla.

“Looking at the last 28 weeks of hog slaughter, FI hog slaughter totaled 70.70 million head, up 3.7 million or 5.5% over the same period last year, which says to me  U.S. pork producers started holding more gilts when they heard the news of ASF in China.”

What will expansion look like? Brown says this report shows one view of it, and some people think it’s even a little short.

He says it appears USDA is undercounting farrowings and pig crop, resulting in even more hogs. 

“We were doing pretty well as far as hog slaughtering margins compared to a year ago through October when we started pushing Saturdays up to over 300,000 head. Then we started getting slaughtering margins pushing up toward record highs.”

Hog slaughtering margins appear to have reached record highs in November, he says, which has pushed hog prices back down. With all this production, it’s a shame hog producers have not been able to benefit from it so far, Brown adds. 

“That being said, seasonally as marketing hog numbers come down a little bit and we back down off this 100% to 105% of capacity, margins should collapse and hog prices should have upward pressure on them as these margins come back to a more historical standpoint,” Brown says. 

Price projections for 2020
Brown says he used higher export numbers than most analysts when he put together his 2020 price forecast. Using the CME One-Day Lean Hog Index, he predicts $75 per cwt. for first quarter, $92 for the second and third quarters, and $75 for the fourth quarter.

Also using the CME One-Day Lean Hog Index, Kalo forecasts $71 per cwt. for first quarter, $86 for second quarter, $83 for third quarter and $71 for fourth quarter.

Cozzens used the National Base Carcass Price for his price forecast. He predicts $65 to $68 per cwt. in the first quarter; $75 to $79 in second quarter; $73 to $78 in third quarter and $61 to $67 in fourth quarter. He says that puts their average for the year at $69 to $74. He also shared his prediction for 2021 is an average annual price of $69 to $77.

More from Farm Journal's PORK:

September U.S. Hog Inventory Breaks Records

Pork Outlook: Don’t Let Your Guard Down in 2020

What’s the Biggest Game Changer in the 2020 Pork Outlook?

Markets Jump on Skyrocketing Hog Inventory