Hog producers are reeling from sudden, unexpected bad news – pig numbers in the United States are not declining as expected.
And there’s a mountain of pork sitting in cold storage, threatening to glut the market for months to come.
“It’s bad news, if it’s true,” said John Germs, former chair of SPI Marketing Group, about the recent U.S. Department of Agriculture Hogs and Pigs Report.
“I’ve always been optimistic, but it’s coming to an end.”
The June 25 report said that there were only three percent fewer farrowings and two percent fewer pigs coming to market between March and May, and June to August farrowings are expected to be down only four percent from the same time last year.
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This is a shock because producers expected to see farrowings fall by much more. Earlier USDA reports said the sow herd had declined by six percent, which should almost automatically lead to fewer farrowings.
Janet Honey, a hog market watcher for Manitoba Agriculture, said the newest USDA report still shows a six percent decline in sows, so the higher farrowing number is a mystery.
“There’s a problem there,” said Honey. “Which number is correct?”
Some analysts have suggested recent slaughter numbers include large numbers of gilts that are being taken out of the breeding herd because of a pseudorabies eradication
program.
If so, there might be fewer farrowings than USDA is predicting in the last half of 1999, which means better prices.
But if the farrowings prediction in the USDA report is correct, prices will be much lower than expected.
Immediately on the release of the hogs and pigs report, hog prices plunged to the low $20s (U.S.) per hundredweight, well below the $30 cost of production.
Most analysts now predict third quarter prices in the low $30s, well below the previous estimate of around $38.
An exacerbating factor is the amount of pork in storage, which is at record levels. It is 23 percent above 1998 levels at 589.4 million pounds. That equals about two weeks of U.S. domestic pork consumption, according to University of Missouri economist Ron Plain.
Reduce stocks
To get rid of the stored pork over the next 18 weeks, retailers would have to move out of storage the equivalent of three percent of the total pork supply every week. That would cancel out the decline in live pig marketings.
“Much of the price advantage of this lower hog inventory will be offset by frozen stocks,” said Plain. For the rest of the summer pork supply could be the same as last summer.
Plain said last week’s slaughter numbers were very high, suggesting producers might be clearing animals they have been hanging onto, and liquidating more of the sow herd.
If true, that will help prices. So will the startup of the Maple Leaf slaughter plant in Brandon, Man., which will increase demand.
Honey said Maple Leaf could cause eastern prairie producers to suffer less than their American counterparts, since the new packing plant will probably have to bid for pigs.
If the USDA farrowing intentions numbers are correct, the resulting low prices will force many small producers to leave the industry.
The involuntary scale back will mean 2000 will probably see a return to good prices, even if that doesn’t occur this fall.
For some it is too late, said Germs, who had been optimistic after earlier USDA reports. Producers can’t wait, he added.
“They’ve lost too much money and it’s taking too long to recoup their losses.”
