URBANA, Ill. — The USDA’s September Hogs and Pigs report places the Sept. 1 inventory of all hogs and pigs at 74.3 million head, up 2.2% from last quarter and 0.26% from last year — a slight surprise, given pre-report estimates that it was 0.2 to nearly 1.9% lower, according to Jason Franken, agricultural economist at Western Illinois University and contributor to the farmdoc team, housed in the Department of Agricultural and Consumer Economics, part of the College of Agricultural, Consumer and Environmental Sciences (ACES) at the University of Illinois Urbana-Champaign.
“Much of the surprise reflects market hogs, which the USDA pegs at 0.4% higher compared to trade expectations that ranged from unchanged to nearly 1.9% lower; yet all estimates agree on a roughly 1% smaller breeding herd,” Franken said.
All weight classes of market hog inventories come in a bit above average pre-report expectations, with the lighter classes accounting for most of the unanticipated market hogs, Franken explained. Only the under-50-pound class lands above the anticipated range, up slightly from last year and 1.6% more than the average pre-report estimate. All other weight classes are within pre-report expected ranges. Overall, compared to a year ago, there are only 0.4% more hogs weighing under 180 pounds, which will be the market hogs arriving at processing plants from October 2023 through February 2024.
“The modest increase in lighter-weight-class hogs partly reflects that the June-August pig crop is also just less than 0.5% larger than last year, compared to expectations ranging from 0.8% to 2.1% lower. About 3.7% fewer sows farrowed is more than offset by a record 11.61 pigs saved per litter, or 4.3% more than were saved in the same period last year,” he said.
“Hence, onward marches the upward trend in pigs per litter. The barely larger pig crop should lead to marginally larger slaughter this winter. Farrowing intentions for the fall and winter, respectively, are down 5.2% and 1.4% from the prior year, which along with the trend in pigs per litter, suggests lower spring and potentially higher summer slaughter levels than a year ago.”
Cold stocks of pork have rebounded and even resumed seasonal patterns, although they still have not returned to average pre-Covid-pandemic levels. According to the USDA’s Cold Storage Report, cold stocks of pork on Aug. 31 are up 0.07% from the previous month but down nearly 13% from a year ago. Beef stocks are up 3% from last month but down 18% from last year, while poultry stocks are down 0.25% from last month but up 1% from a year ago.
“In light of tight supplies, domestic inflationary pressures, and export demand, the USDA has revised forecasts of U.S. per capita pork consumption downward to 49.8 pounds per person in 2023 and 2024, which is the lowest it’s been since 2015,” Franken noted.
The U.S. exported 505 million pounds of pork in July, or about 4% more than in July of 2022. Much of the growth reflects greater exports to Canada (13%) and Mexico (11%), while declines occurred in major Asian markets like South Korea (-25%), China and Hong Kong (-14%), and Japan (-8%). Accordingly, the USDA lowered prior estimates for U.S. pork exports to 1.6 and 1.8 billion pounds, respectively, in the third and fourth quarters of 2023; however, they are still 2.4% and 7.1% above a year ago, raising annual exports by 7.2% over the last year. Annual pork exports are forecast to rise 1.5% to 6.9 billion pounds in 2024.
“Taking all of this into account, prices over the next four quarters seem unlikely to exceed current costs of production around $99/cwt. The forecast presented here is for the national weighted average net price on a carcass basis for all transactions for producer-sold barrows and gilts, including negotiated and contract prices. This net price should be more reflective of what producers receive, on average, and often averages a premium of more than $2/cwt over the base price. For the period from July through September, it averaged $96.23/cwt compared to $92.53/cwt for the corresponding net prices for negotiated or spot transactions,” Franken stated.
“In general, hog prices tend to be higher in the second and third quarters, with lower prices in the first and fourth quarters. Consistent with that pattern, prices are forecast to drop to an average of $81.00/cwt for the fourth quarter of 2023. For 2024, prices are forecast to average $80.60/cwt in the first quarter and then rise seasonally to $90.20/cwt and $97.09/cwt in the second and third quarters. However, if current gains in pigs per litter do not persist to offset intended cuts to farrowings, then higher prices may be realized.”
Discussion and graphs associated with this article available here https://uofi.box.com/s/zlt60w6a2iz2zl7wmqfdlxv46qs26jn5 or here: https://farmdocdaily.illinois.edu/2023/10/record-pigs-per-litter-offsets-cuts-to-farrowings.html
— University of Illinois ACES