Hog Economist: If It Weren't For The Virus, We'd Be In Expansion Mode
Too Much Expansion 060420
The next quarterly Hogs and Pigs report from USDA will be released later in the month.
The last report, released in late March, showed continued expansion for all hogs and pigs at 77.6 million head.
Joe Baltes, from Rolling Prairie, Indiana, is content with the size of his hog operation.
“We’re just a small operation,” he says. “You really [have to] be careful on how much you expand and at what rate.”
Baltes sells market hogs to a packing plant and a local processor.
If it weren’t for the virus, Dermot Hayes, an Iowa State University economist, says we’d be getting strong signals to expand.
Much has changed since the last report with packing plant closures and culling. Many producers, who have finishing barns, and especially sow co-ops, are still dealing with backlogs.
“There’s just no way we can get them all sold,” says Washington, Iowa producer Rob Stout. “I’ve talked to multiple buyers from different companies and there’s just no way.”
It’s why most economists feel expansion is not going to happen.
“We started destroying some young pigs and aborting sows almost immediately when [COVID-19] really started hitting,” says Steve Meyer, an economist with Kerns & Associates. “That’s going to affect our fourth quarter supplies pretty dramatically.”
There’s still a backlog of more than 2.4 million hogs, he says, and roughly 400,000 have been euthanized.
“I don’t see any place during the summer we can materially reduce that backlog of pigs,” Meyer adds.
USDA’s 2020 pork production estimate in May was down sharply from April, suggesting it expects significant depopulation of the hog herd. Some figure more than 5 million fewer hogs or more will be processed than anticipated earlier this year.
“USDA told us in May there’s going to be 7.5 million head of hogs that are somehow going to be euthanized, perished. We assume that may be as much as a million and a half market hogs. The rest will then be baby pigs, sows that are aborted and those kind of things,” says Dan Basse, an economist and president of AgResource Company.
Economists say the next Quarterly Hogs and Pigs report will shed some light on which segment of the industry saw the biggest decline.
“Was it the weight category of 180 [pounds] and up or the weight category of 40 [pounds] and down? I’m more pushed to the end of that, which tells me indeed things will be slowing down,” Basse says.
“We had a lot of people ask questions about new construction in the fall and then not pursuing it this spring,” says Rachel Rinner, owner of Knee Deep Solutions in Washington, Iowa.
Rinner helps with the Department of Natural Resources on-site inspections, planning and permits for hog producers in southeast and central Iowa.
“We’ve had several people who have gotten permits for new buildings and then put them on hold,” Rinner says. “We do have some new construction going on but maybe about one-third of what we would usually do.”
Hayes says expansion lies in exports but believes producers are going to be cautious to build.
“The producers who survive will have less equity and they’re not going to want to build,” he says. “They’ll also realize how risky this business is.”
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