Herd expansion could mean lower pork prices for consumers by the middle of next year.
The U.S. pork industry today is small by historic standards. But, signs of producers holding back more females to increase the breeding herd mean the industry is in the process of expanding, which could put more pounds of pork in grocery stores by the middle of next year.
“We continue to have historically high hog prices, as well as retail pork prices,” said Glynn Tonsor, livestock economist for K-State Research and Extension. “We also have improving production costs as grain prices are coming down. That’s sending a signal, an economic incentive, for pork producers to expand so they can sell more pigs at a positive dollar per head margin than they did last year.”
Information about the state of the U.S. pork industry was included in the quarterly Hogs and Pigs Report, released by the U.S. Department of Agriculture’s National Agricultural Statistics Service on Sept. 26. Tonsor said the report provides the best estimate of the current size of the industry and how large it will be in the future.
According to the report, the inventory of all hogs and pigs on Sept. 1, 2014 was 65.4 million head, which was 2 percent lower than a year ago but up 6 percent from June of this year. The breeding inventory was at 5.92 million head, up 2 percent from last year and up 1 percent from June. The market hog inventory was at 59.4 million head, down 3 percent from last year but 7 percent higher than it was in June.
Further, U.S. hog producers intend to have 2.89 million sows farrow, or have pigs, during the September through November 2014 quarter, which is up 4 percent from the actual farrowings during the same period in 2013 and up slightly from 2012. A projected 2.87 million sows will farrow December through February 2015, up 4 percent from 2014 and up 3 percent from 2013.
A consumer focus
What does this expansion outlook mean for pork consumers? Tonsor said most likely around the middle of next year, retailers will see an increase in pork supplies coming from this expansion. An increase in supplies likely means cheaper pork prices for consumers.
“None of this is guaranteed, but our current estimate is that we’re going to have more sows, and therefore more pigs and more pork pounds that show up starting around April 2015,” he said. “There will be some relief in high prices (consumers) have been seeing for some time now. Most of these adjustments take a long time, not quite as long of a biological lag that we have in the cattle industry, but they still take time.”
Specifically, it would take in excess of eight months from starting the process of holding back females, to breeding them, to farrowing them, to weaning their pigs and feeding them to a finished market weight.
“The reason I highlight that is the tight pork supply situation we have today is here for the rest of 2014,” Tonsor said. “Couple that with strong meat demand in general, strong pork demand in particular, we’re probably going to have historically high pork prices the rest of 2014.”
One of the greatest challenges the U.S. pork industry has faced recently is PEDv, or porcine epidemic diarrhea virus. Discovered in the United States for the first time in 2013, PEDv is a disease caused by a porcine coronavirus and can lead to vomiting and occasional diarrhea in sows and gilts and severe diarrhea and vomiting in nursing and recently weaned pigs, according to Kansas State University’s College of Veterinary Medicine.
PEDv spreads quickly and can lead to severe sickness and death in pigs, although it is not a threat to food safety or humans. A Pork Checkoff report estimates the disease caused a loss of 7 million to 8 million pigs from June 2013 to April 2014.
“To the extent we have additional concerns about PEDv, that could mute some of this increase in pork production,” Tonsor said.
PEDv has reduced the amount of pigs weaned per litter, he said, and the net effect is fewer market hogs in the United States, therefore fewer pork pounds produced. In the past, the virus has hit swine herds worse from November through April. Although vaccines have been developed recently, it’s unknown if producers can battle the virus more effectively through the coming winter with use of the new vaccines.
Pork demand still high
Despite the recent and current tight supply situation caused in a large part by PEDv, Tonsor said retail pork demand has been strong. Given the pounds produced and consumed in the United States recently, the retail price realized was higher than most expected.
“The second quarter of 2014 was actually the best quarter for retail pork demand, the way I estimate it, in more than 10 years,” he said. “It’s important to recognize that’s a positive signal for the entire pork industry, because the public was willing to pay more for those reduced pork pounds than we expected.”
“The U.S. public sees more value in those (pork) products,” he continued. “Maybe the products are more convenient. Maybe the consumers were less sensitive to the price or had improving incomes. Probably some of all of the above is actually truth, which led to this positive demand story.”
Source:ksu.edu