Although the June Hogs and Pigs Report came in close to analysts’ expectations and was a “neutral report” in the market, Altin Kalo of Steiner Consulting in Merrimack, N.H., said it does provide hints into supplies and pricing down the road.
Kalo shared his reactions to June 1’s USDA’s Hogs and Pigs Report During a webinar hosted by the National Pork Board and the Pork Checkoff on June 29.
First, a Look at the Numbers
The total inventory for all hogs and pigs on June 1 was 72.5 million head. That’s down 1% from a year ago and down slightly from March 1.
The market hog inventory on March 1 was 66.4 million, down 1% from 2021, and slightly lower 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 50% of the total U.S. hog inventory, up 1% from 2021.
Other highlights from the report include
• The breeding inventory numbers came in at 6.17 million head, down 1% from a year ago and up 1% from March 1.
• March through May 2022 pig crop, at 32.9 million head, was down 1% from 2021.
• The number of sows that farrowed during this three-month period was down 1% from 2021 at 2.99 million head, which represents 49% of the breeding herd.
• The average pigs saved per litter was 11.0 for the March through May 2022 period, compared with 10.95 last year.
The report also revealed U.S. hog producers intend to farrow 3.02 million sows during the June through August 2022 quarter, which is down 1% from the actual farrowings during the same period in 2021, and 7% lower compared to the same period in 2020. Intended farrowings for September through November 2022 fell 1% from last year to 3.01 million sows. Intended farrowings are 5% lower than the same period in 2020.
What’s the Implication for Pork Supply?
“USDA places the inventory of market hogs into four different buckets. That’s helpful because depending on the bucket, you know what the supply in each one of those buckets is,” Kalo said.
This helps pinpoint what sort of supply can be expected during that time period. Typically, slaughter is higher in the fall and in the winter, and it tends to decline in the spring and the summer. The exception was in 2020 when plants shuttered in the spring due to COVID-19, Kalo said, and caused hogs to get backed up and be processed in June, July and August when usually supplies are light.
“We’re following the seasonal trend at this point in time. When we look at those market hog baskets, what they imply is a weekly slaughter that through early to mid-July is about 0.8% lower than a year ago,” he said. “We’ve already seen a fair amount of these hogs already come to market. When we look at weekly slaughter up to this point, it’s been running a little bit ahead of what the USDA estimate is. The expectation is that we may see a bit more hogs come to market in the next two to three weeks.”
For the next period of mid-July to late August, or hogs between 120-170 pounds, the expectation based on the survey is that supplies should run a bit less than 1% from a year ago.
“When you look at the supply that came to market during that period of time, it was a little bit under 2.4 million hogs so you can calculate that we’re probably, according to the survey at least, going to be around 10,000 to 15,000 head less than the weekly kill that we saw last year,” Kalo said.
For September to early October, the survey would imply supplies during that period will be about 0.6% lower than they were a year ago, he added.
One number that was slightly different from what the analysts were expecting was the supply of hogs coming to market during mid-October to late November, which are hogs under 50 pounds at this point in time, Kalo said.
“The survey says that supply of hogs is about 1.3% lower than it was last year. Last year we saw weekly slaughter during the time period hit about 2.6 million head per week. According to this we’re probably going to be about 30,000 to 35,000 head below that on a weekly basis,” he said.
But again, those are rough numbers, he noted. In any given week there are multiple factors at play – plants that may be down, plants running maintenance, and other kinds of disruptions. It helps set a baseline of sorts as to what the supply estimates for rest of the summer going into fall might be.
The Number to Pay Attention To
Kalo said one of the better numbers USDA has in its survey is the breeding herd.
“We can always argue about the number of market hogs. Were they counted correctly or placed in the right buckets?” Kalo said. “But one number that I think all producers know pretty well is how many sows they have.”
This number gives a good indication of what to expect going forward, he added. Between December 1, 2019, and March 1, 2022, the industry saw the breeding herd drop almost 7%.
“Some of that was just the fact that the margin started to erode,” he explained. “I mean, we’ve been increasing the breeding herd for quite some time. Then COVID-19 hit and caused a lot of pain in the industry that may have forced some further reductions. Then we started to see higher feed costs prices. All of those combined to put a lot of pressure on the breeding herd.”
The U.S. breeding herd is at the lowest level it’s been at in about five years. This latest survey put the breeding herd at 6.17 million head, 1% lower than it was a year ago, but about 70,000 head higher than it was in March.
Does this mean the U.S. swine breeding herd found a bottom? Is it about to trend higher?
Although the USDA’s survey shows there are a few more sows out there than the industry had three months ago, he explained this doesn’t necessarily mean the breeding herd is going to keep growing. Data showed the U.S. breeding inventory at 6.17 million head, up 1% from three months ago.
“We’ve had some previous years like 2012 and 2013, where going into summer we had an uptick in the breeding herd, and then those high feed costs come into play and the margins start to erode,” Kalo said. “Then, you see that breeding herd start to pull back again.”
What contributed to the increase from quarter to quarter? Kalo said one is the number of sows culled during the quarter. He noted that a number the industry doesn’t get to see is gilt retention.
“There’s no data out there from USDA that tells us that number. The only way that maybe we can get to it is backing into that number when you know all the other pieces,” he said.
According to the latest data, Kalo said it looks like the industry retained a few more gilts than in 2021, about 2.5% more gilts according to his calculations. Better returns and Proposition 12 were two reasons that more gilts may have been retained.
Another point Kalo made about the breeding herd is that farrowing intentions seemed a little low from a historical perspective and he expects the industry may see a few more farrowings than what the survey suggests. That implies that production numbers down the road, especially for the December through February quarter may not be down as much as what the USDA would suggest, he said.
Pigs Per Litter Improves
Although the industry has been on an upward trend in the number of pigs saved per litter, the last couple of years saw a flattening out, Kalo said. COVID-19 and disease pressures have taken away some of the supply that’s come to market.
“Are we going to go back to the growth trend? Again, if we’re able to manage the farrowings better than we did last year, and if we’ve got a little bit more pigs per litter, than the expectation would be for to get a little bit more supply especially the December through February period,” Kalo said.
The pig crop for the second quarter, which would be the March through May period, was down 1% compared to a year ago.
“If I were to take the farrowing numbers that USDA published and apply to it a pigs per litter that reflects recent history, we would expect the June through August pig crop to be down 1.2%,” Kalo said. “But like I mentioned earlier, I think the odds are or risk is that that pig growth number may not be down as much as when USDA suggests.”
For the September through November pig crop, which would be the number of hogs coming to market next spring, Kalo said the expectation is for supplies to be close to what they were this year.
