The spike in feed costs has led to many questions about livestock producer responses and productive capacity in 2023, Steiner Consulting Group says in the latest Daily Livestock Report.
“We have previously discussed the effect that drought has had on the beef cow herd and the potential for a dramatic decline in beef supplies next year and in 2024. USDA recognized this in its May update, projecting an almost 7% drop in beef production in 2023,” Steiner Consulting says.
Meanwhile, hog production is forecast up slightly for next year, largely on expectations that productivity will return to trend.
“No one knows how PRRS and other pig diseases will play out next winter. But breeding herd statistics are published weekly/monthly and they offer some indication about producer responses,” Steiner Consulting says.
A Look at Sow Slaughter
For example, sow slaughter in April was estimated at 242,200 head, which is 28,200 head or 10.4% less than a year ago. However, there was one less marketing day in April 2022 vs. 2021. Even when that difference is normalized, slaughter in April was 6.2% lower than the previous year, Steiner Consulting points out.
Sow slaughter during the first week of May was 57,400 head, or 3.5% lower than the previous year. Steiner Consulting expects slaughter to be down at least 2% for the month as compared to a year ago.
“It does not appear to us that producers at this time are rushing to liquidate their breeding stock even as corn prices are well over $7/bushel,” Steiner Consulting adds.
Still, year-on-year comparisons can be misleading if the number of breeding stock on the ground is much lower than normal.
“If you have fewer sows then you will also have fewer sows to cull,” analysts explain. “We estimated May slaughter at –2% a year ago and our current sow slaughter estimate for all of Mar‐May is 764,474 head, about 57k head or 6.9% lower than a year ago. The hog breeding herd inventory on March 1 was 6.098 million head, which implies a slaughter/inventory ratio of 12.5%. This is not that far from the 1992‐2019 average ratio of 12.7% and below the 2020 and 2021 ratio of 13.3% and 13.2%, respectively.”
Between COVID-19 disruptions and uncertainty in the global pork market, producers have been led to liquidate their breeding stock the last two years. The pace of liquidation has slowed down considerably and the culling rate, at least based on Q2 data, appears to be back to a more expected level, the report explains.
Is Culling Rate Higher Than Normal?
“Sow prices have declined since early May, mirroring the decline that we saw a year ago. Does this mean a higher than ‘normal’ cull rate in the last two weeks? We cannot answer that without data, but we would also point to the broader weakness in the pork market, especially the trend in the value of pork trim,” Steiner Consulting says. “Last year end users were caught short, with the inventory of pork trim during the spring well below average levels.”
The inventory of pork trim at the end of April 21 was 41.3 million pounds, which is 14% less than in 2019 (2020 is not a good comparison, analysts say) and 28% less than in 2018. In 2022, however, at the end of April, pork trim inventory was 52.1 million pounds, 26% higher than in 2021. Pork supplies have also been a bit higher than expected recently. Slaughter last week was 2.4M and weights were up 1.5%, adding a bit more pork trim supply to the market.
“The credit value of sows has declined in this environment, a function in our view of the price trend for pork trim and demand at both retail and foodservice. It does not appear to be an indication of sow liquidation,” Steiner Consulting says.
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