USDA Hogs and Pigs Report: Is This a Defining Moment for the Pork Industry?
Of the 75.0 million hogs and pigs in the U.S., the latest USDA Hogs and Pigs Report as of Dec. 1 notes 69.0 million were market hogs, while 6.00 million were kept for breeding. The total inventory is up slightly from a year ago, but the breeding herd is down 3% from 2022.
U.S. hog producers intend to have 2.90 million sows farrow between December 2023 and February 2024, down 2% from a year ago.
With all that’s been written and talked about regarding 2023’s trials and tribulations in the pork industry, there may be one final question to ask as we flip the calendar to 2024.
“Is this a defining moment for the pork industry?” asked Lee Schulz, associate professor and Extension economist at Iowa State University during a Hogs and Pigs Report webinar hosted by the National Pork Board and the Pork Checkoff on Friday.
It’s hard to say if it is or isn’t when you look at what producers are facing today, he continued.
“Defining moments are often thought of as moments of truth, but in the throes of it, they’re usually a moment of uncertainty, not clarity,” Schulz said. “But, maybe now we’re starting to see some things come into focus in marketplace as we begin to see larger supply adjustments.”
This provides a little optimism for producers as they move into 2024 – a year that’s not expected to be much better than the year producers so quickly want to leave behind.
“I’ve been fortunate to be in this job for 12 years working with pork producers and I don’t think there is a more resilient group,” Schulz said. “If you think of what producers have faced over the last several years and have continued to persevere and come out oft stronger. As tough as times look, we know times will get better. As we wrap up 2023, it is a tough year to look back on but there are certainly some opportunities going forward as we go into 2024.”
A Look at the Numbers
The total inventory for all hogs and pigs on Dec. 1 was 75.0 million head. That’s up slightly from a year ago but down slightly from Sept. 1.
The market hog inventory on Sept. 1 was 69.0 million, up slightly from 2022 but down slightly 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 51% of the total U.S. hog inventory, up 3% from 2022.
The breeding inventory numbers came in at 6.0 million head, down 3% from a year ago, and down 3% from Sept. 1. The Sept. through Nov. 2023 pig crop, at 34.6 million head, was down slightly from 2022. The number of sows that farrowed during this three-month period was down 4% from 2022 at 2.97 million head, which represents 48% of the breeding herd. The average pigs saved per litter was 11.66 for the Sept. through Nov. period, compared to 11.22 last year.
U.S. hog producers intend to farrow 2.90 million sows during the December 2023 through February 2024 quarter, down 2% from the actual farrowings during the same period in 2022, and down 1% from the same period in 2021. Intended farrowings for March through May 2024, at 2.91 million sows, are down 1% from the same period in 2022, and down 2% from the same period in 2021.
All inventory and pig crop estimates for December 2021 through September 2023 were reviewed using final pig crop, official slaughter, death loss, and updated import and export data. The revision made to the September 2023 all hogs and pigs inventory was 1.4%.
A revision of 1.1% was made to the June through August 2023 pig crop. The net revision made to the June 2023 all hogs and pigs inventory was 1.6%. A net revision of 1.6% was made to the March through May 2023 pig crop. The net revision made to the March 2023 all hogs and pigs inventory was 1.7%. The net revision made to the December 2022 all hogs and pigs inventory was 2.5%. The revision made to the September 2022 all hogs and pigs inventory was 1.0%. A revision of 2.2% was made to the June through August 2022 pig crop. The net revision made to the June 2022 all hogs and pigs inventory was 0.2%. The net revision made to the March 2022 all hogs and pigs inventory was 1.4%.
What Surprised Analysts?
Schulz considers it a surprise when there's at least one percentage point difference between the actual and the average of pre-report expectations.
The first surprise in the Dec. 1 report was the kept for breeding category, pre-report estimates had it down 1.3% compared to a year ago, but it came in at a much larger decline at 3.3% - a 2-percentage point difference between what analysts expected and what the report showed.
“As we looked at the economic situation that producers have been facing and some of the sow slaughter levels, I think there was a good possibility that we were going to see a larger decline year over year in the breeding herd,” he said.
Another number to note was the market hog inventory number in the 180 pounds and over category, he pointed out. The report came in 1.8 percentage points higher than analysts expectations. For the first three weeks of December, slaughter had been up 3.8%. So, it was fully expected that the industry would see a larger inventory of 180 pounds and over, he noted.
“The other big surprise here, and maybe it's not as easy to call it a surprise anymore, is the change in productivity or pigs saved per litter. When we look at that number, it was 0.8 percentage points higher than the pre-report expectations and record large at 11.66 pigs. That caused a much larger increase in the pig crop relative to pre-report expectations. So, the pig crop was slightly below year-ago levels, but that was driven by the much lower sows farrowed (4% lower), but then a much larger than expected increase in productivity,” he explained.
The industry is starting to see larger increases in litter rates year over year, Schulz said.
“I think it gives us some confidence that we're going to continue to see the genetic potential realized. We’ve seen lower disease incidence, in some cases and in some states, that's helped support this,” Schulz said. “Then, as producers cull the least productive sows, that's allowed the industry to bring up the herd average, so to speak.”
Sow Slaughter and the Breeding Herd
Sow slaughter was high in June through August 2023 at 9.4% compared to the same period in 2022. It’s moderated in the September through November quarter, but it’s still up 3.6% year-to-date, he said.
“There's been a lot of talk about sow slaughter, because we've seen a lot of changes there. I think this plays into some of the adjustments we've seen in the breeding herd level,” Schulz said. “The real question we have now even if sow slaughter is up, is at what rate are gilts replacing those sows?”
The current Dec. 1 breeding herd estimate suggests lower gilt retention, which has equated to a much lower breeding herd.
Structural Change Ahead
The percentage of total hog inventory owned by contract or operations with over 5,000 head but raised by contract growers came in at 51%. Schulz said he has graphed this report data over time because it shows the industry has seen a large increase in contract production. The data goes back to 1996 when it was 21%. Last quarter was an all-time high at 52%, he noted.
“As we look at the economic conditions that producers are facing, we know there's been continued structural change in the pork industry. I bring these statistics up to show what changes we may see if some of the trends continue,” Schulz said.
The 2022 Census of Agriculture data will be released in February, providing more precise numbers, he noted.
“That will help us speak to some of the structural changes going on in the industry. Other things we will look for will include changes in the number and size of operations, types of operations and business arrangements,” Schulz said.
