American farmers have finally saved the hog industry’s bacon.
Hog prices increased after the U.S. Department of Agriculture found far fewer slaughter and breeding hogs on U.S. farms than the industry expected and projected a much greater decline in slaughter hog numbers in coming months.
“We’re still not back to profitability yet, but this is definitely encouragement,” said Manitoba Pork chair Karl Kynoch after the USDA reported a 3.9 percent reduction in the U.S. breeding herd in its March hogs and pigs report, which was released March 26.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
“We’ll see how much of a turnaround we’ll get.”
Cash and futures prices shot higher in the wake of the report, blasting out of a week-long decline in prices before the report was issued.
That decline was caused by generally bearish projections from private analysts about sow numbers, a decline of only 2.6 percent, so the surprisingly large cut caused a major turnaround.
USDA said the market hog herd declined by 2.7 percent, three times more than the .09 percent reduction expected by the industry.
The USDA expects spring farrowings to drop by four percent and summer farrowings by 2.4 percent.
Manitoba Pork Marketing Co-op risk management specialist Tyler Fulton said near-invisible changes on American hog farms are behind the big shift – hard to spot but of major importance.
“There was no indication that we would be looking at these kinds of reductions this quickly,” said Fulton, who suspected sow productivity would be slumping.
“But that’s the nature of some of these sea changes. It’s hard to pick up any signs ahead, but when it’s upon us it’s obvious and apparent.”
Fulton said he had expected U.S. farmers to hold back fewer gilts and allow aging sows to grow older and less productive, which appears to be occurring.
“Those two factors are what’s causing the reduction in the pig crop,” he said.
University of Missouri hog market analyst Ron Plain said traders wrongly assumed that recently profitable prices would mean U.S. farmers would keep their production running at maximum.
“The trade thought the futures numbers were pretty positive and we would slow the herd reduction down, but producers seem to have been looking at their bank accounts instead,” Plain said.
Analysts say these herd reductions bode well for the coming year. Fewer market hogs will go to market this spring and summer, and fewer sows means fewer market hogs for the fourth quarter.
The reduction in slaughter supplies should keep packers competing for pigs until late next spring, analysts add.
“This offered something for every month, it seems,” Fulton said.
