The September USDA Hogs and Pigs Report saw much greater reductions in supply than many analysts predicted
By Jackie Clark
The USDA released the third quarter Hogs and Pigs report on Sept. 24, and many analysts were surprised at the bullish figures.
Dr. Steve Meyer, an expert from Partners for Production Agriculture, went over the numbers in a Sept. 24 Pork Checkoff Webinar.
The all hogs and pigs inventory sits at 75.35 million head, up 1 per cent from June 2021 but down 3.9 per cent from a year ago.
That almost 4 per cent represents a “significantly larger decrease than analysts had expected, they thought it would be down 1.7,” Meyer explained.
Similarly, the breeding herd is at 6.19 million head, down 2.3 per cent from a year ago, when experts had only predicted a 1.1 per cent reduction, and the market herd has 69.162 million head, down 4.1 per cent compared to a predicted 1.8.
Broken down by weight category, the lower categories followed a similar trend, whereas the higher weight categories, 120 to 179 lbs and over 180 lbs, were down only 1.4 and 1.3 per cent from a year ago, when analysts had anticipated 1.9 and 2 percent reductions, respectively.
The number of “sows farrowing this immediate past quarter was 3.046 million head, down 6.6 per cent from last year. Analysts had expected that to be down 3.7 which I thought was a pretty big number to start with,” Meyer added. “The June/August pig crop 33.9 million down sharply from a year ago, 6 per cent.”
Analysts had predicted only a 2.6 per cent reduction in pig crop.
Dr. Scott Brown from the University of Missouri dug deeper into breeding herd numbers.
The breeding herd decrease more than expected from a year ago, but was also down half a per cent compared to June 2021, when usually September number are up that same amount, Brown explained.
“There’s some good news,” he said. However, the number are a “bit of a mixed bag when you start looking state by state.”
Illinois’ breeding herd actually increased 80,000 head “so it’s not the same everywhere you go,” he added.
“The number for me that got my attention was the June through August farrowing at 93.4 per cent of a year ago, that certainly sets us up for a more positive 2022 looking ahead,” Brown said.
Hog and pig supply reductions may be due to feed costs, labour shortages, and building supply costs, he explained.
The average number of pigs per litter was 11.13, which “certainly does put it back on the long-term trend” of increasing, Brown said.
However, Meyer noted that that figure still isn’t increasing as much as it had been pre-COVID-19.
“We’ll have to see where markets react next week, but it certainly looks like we’re going to see some pretty positives,” Brown said.
Len Steiner from the Steiner Consulting Group agreed.
“I think we all agree that you should expect December, February and April hog futures to be up … probably going to be a one-click deal,” he said.
“A lot of things influence these markets but one of the things you want to take into consideration is that in 2021 we’ll export the largest tonnage of pork in history,” Steiner explained. 26.28 per cent of the pork produced in the U.S. will be exported.
“30 years ago, this report was really important because it tells us what the supply was, and then all we had to do was figure out what the American public was going to do for consumption. Now we’ve got to figure out what the world’s going to do,” Steiner said. With China starting to rebound from the impact of COVID-19 and African swine fever, many analysts thought the U.S. might have more pork dedicated to domestic production.
However, after this report “we’re still reworking the numbers, but we think we’ve flipped that, we are now going to give the American public less pork in 2022 than they consumed in 2021. As we all know, when you give somebody less, quite often that has bullish implications,” he explained.
Though some input costs remain high, the pork market should be positive for producers in the next year.
“It’s been a good year for producers for sure, but, having said that I think … it’s certainly a been challenge in regards to feed costs,” said John Nalivka from Sterling Marketing. “Feed costs have been beyond significantly higher,” than usual.
“Going forward, I’ve got producer margins, grow-finisher margins, hovering anywhere in that $40-$80 per head for the better part of next year,” he explained.
“For the year I think it’s an average of $45 against my input costs. That would be just about equal to where we’ve been in 2021.”
Finally, it’s important to note that there were “significant revisions in this report,” Meyer said.
“I felt very strongly that they were going to have a significant revision to the Dec-Feb pig crop because of how short slaughter had been relative to our expectations this summer,” he explained. And in fact, the USDA “took 1.292 million pigs out of that Dec-Feb pig crop estimate, brought it down to 31.978 million. That is a huge reduction, a 3.9 per cent revision.”
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