After reviewing a slightly bearish USDA Hogs and Pigs Report, Altin Kalo, chief economist with Steiner Consulting Group, said pork supplies are not declining as fast as some people are saying they are.
“Producers have been a lot more resilient and have withstood some of the demand shocks that we saw during the summer months,” Kalo said during a post-report webinar hosted by the National Pork Board and the Pork Checkoff on Thursday. “The expectations for next year are that pork supply may not be lower, as previously expected. That’s because the reductions that we’re seeing in the breeding herd have so far been offset by improvement in productivity.”
The average pigs saved per litter was an all-time record level at 11.61 for the June through August period, compared to 11.13 last year, Kalo said.
A Look at the Numbers
The total inventory for all hogs and pigs on Sept. 1 was 74.3 million head. That’s up slightly from a year ago and up 2% from June 1.
The market hog inventory on Sept. 1 was 68.2 million, up slightly from 2022 and up 2% from the previous quarter. The total number of hogs under contract owned by operations with over 5,000 head, but raised by contractees, accounted for 52% of the total U.S. hog inventory, up 2% from 2022.
The breeding inventory numbers came in at 6.08 million head, down 1% from a year ago, and down 1% from June 1. The June through August 2023 pig crop, at 34.2 million head, was down 4% from 2022. The number of sows that farrowed during this three-month period was down slightly from 2022 at 2.95 million head, which represents 48% of the breeding herd.
U.S. hog producers intend to farrow 2.93 million sows during the September through November 2023 quarter, down 5% from the actual farrowings during the same period in 2022, and down 4% from the same period in 2021. Intended farrowings for December 2023 through February 2024, at 2.91 million sows, are down 1% from the same period in 2022, and down slightly from the same period in 2021.
All inventory and pig crop estimates for September 2022 through June 2023 were reviewed using final pig crop, official slaughter, death loss and updated import and export data. The revision made to the June 2023 all hogs and pigs inventory was 0.5%. A revision of 0.2% was made to the March through May 2023 pig crop. A net revision of 1% was made to the March 2023 all hogs and pigs inventory. The net revision made to the December 2022 through February 2023 pig crop was 1.5%.
“I don’t know if people who follow the slaughter numbers up to this point would be surprised by the revisions that were made,” Kalo said. “The December 2022 through February 2023 pig crop was increased by about 480,000 head or 1.5% based on the slaughter numbers that we saw in June through August 2023. USDA also made a revision to its March through May 2023 pig crop, raised it only by about 60,000 head, but that number is likely to change as we go forward depending on what we see in terms of slaughter when we look at inventory numbers and the number of market hogs on the ground right now.”
What Surprised Analysts?
As you scroll through the Hogs and Pigs Report, Kalo said most numbers, especially the numbers of market hogs, are quite a bit higher than what analysts were expecting.
“The only number that is a bit on the lower side is farrowing intentions. That’s one of those numbers that’s a little iffy and always subject to a lot of revisions,” he explained.
The report shows producers culled sows more aggressively during the last quarter.
“The cull rate – how many sows went to market relative to what the breeding herd was on June 1 – was the highest that we’ve had since 2012,” Kalo said.
The fairly aggressive sow slaughter that happened during this time period has led to a lot of speculation regarding how big of a breeding herd reduction could be expected, he pointed out.
“The inventory number that we see on Sept. 1 depends on what the slaughter numbers are. We increased slaughter year over year by about 72,000 head during the June through August period. We also imported a few more,” Kalo said.
Still, there’s one number that no one really knows: gilt replacement rate.
“There was a sense out there that maybe the gilt replacement rate actually declined. Instead, at least in my opinion, the number of gilts that were retained was a little bit higher than the same quarter a year ago. You can back into that number because you know all the various inputs,” Kalo said. “That prevented the breeding herd on Sept. 1 to decline as much as it was expected to decline previously.”
What Should We Expect Next?
The improvement in pigs saved per litter is in line with the trend before the COVID-19 pandemic hit, Kalo explained.
“During the COVID years, we had a number of things that played into that number. PPRS played a role and caused a lot of loss to producers. But you also had all kinds of issues with labor, and especially the lack of experienced labor,” he said.
Some of those issues have receded into the background for now.
“That pigs saved per litter number, big as it may appear, has helped offset some of the reduction in the breeding herd,” Kalo added.
What can producers expect next spring and summer? Kalo said if you take the farrowing intentions at face value, USDA shows intentions for September through November are down 5.2%.
“That’s a big reduction and that would be the hogs that you expect to come to market next spring. Then, when we look at the farrowing intentions for December through February, and add to it what the new trend now is for pigs saved per litter, you would expect that December through February crop to be almost 3% higher than it was a year ago. This changes the outlook for supplies for next summer,” he said.
Kalo said it’s a bearish report, in part because the pullback that was expected in terms of supplies may not happen. Or at least he said it may not happen to the degree the market was expecting.
