Source: Rita Jane Gabbett, MEATINGPLACE, 10/3/16


USDA’s latest Hogs and Pigs report once again showed a larger market hog inventory than expected, portending lower hog prices, which could widen packer margins, according to analysts reviewing the report on Friday afternoon.

USDA reported the Sept. 1 market hog inventory, at 64.8 million head, up 3 percent from last year, up 4 percent from last quarter and nearly 2 percent above what analysts were expecting, based on a pre-report survey by Urner Barry.  

The June-August 2016 pig crop, at 32.0 million head, was up 2 percent from 2015 and more than 2 percent above what analysts had expected.

“Each of the last four pigs crops has been record high. The last is the highest ever for any quarter,” noted meat industry consultant Bob Brown on a National Pork Board sponsored teleconference after the report was issued. “That portends record high slaughter for the foreseeable future.” 

United States inventory of all hogs and pigs on Sept. 1, 2016 was 70.9 million head. This was up 2 percent from Sept. 1, 2015, and up 4 percent from June 1, 2016 and about 1 percent higher than analysts expected.  

Breeding inventory, at 6.02 million head, was up 1 percent from last year, and up 1 percent from the previous quarter.
Sows farrowing during this period totaled 3.02 million head, up slightly from 2015. The sows farrowed during this quarter represented 51 percent of the breeding herd.

The average pigs saved per litter were a record high 10.58 for the June-August period, compared to 10.39 last year. Pigs saved per litter by size of operation ranged from 8.20 for operations with 1-99 hogs and pigs to 10.60 for operations with more than 5,000 hogs and pigs.

Farrowing intentions
United States hog producers intend to have 2.93 million sows farrow during the September-November 2016 quarter, down slightly from the actual farrowings during the same period in 2015, and down 2 percent from 2014. Intended farrowings for December-February 2017, at 2.93 million sows, are down slightly from 2016, but up 1 percent from 2015.

The analysts noted, however, that recent quarter Hogs and Pigs reports have repeatedly revealed more hogs in the market than stated farrowing intentions would have produced.  

Prices
The analysts agreed that all these hogs would lead to lower hog prices, noting processors will be bumping up against slaughter capacity until processing facilities currently under construction are completed over the next couple of years.  

Brown said he expects lean equivalent hog prices to fall from about $56.50 per hundredweight in the third quarter to $53.50 in the fourth quarter before rebounding to around $65 in the first quarter of 2017.

Kevin Grier, president of Kevin Grier Market Analysis and Consulting, predicted fourth quarter prices at $54, rising to about $60 in the first quarter on 2017, then about $64 in the second quarter.

With a break-even price of around $60, the analysts noted that lighter weight hogs are coming to market.

“Every pound they add to a hog is a loser,” said Brown. “There is no incentive to add weight to these hogs right now.”

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