How many pigs are really out there? How much pork will be available? Analysts aren’t sure the Sept. 1 Quarterly Hogs and Pigs Report revealed all the answers to those questions.

USDA did not revise any of the market hog inventories in the report, leaving economists scratching their heads a bit.

First, a Look at the Numbers

The total inventory for all hogs and pigs on Sept. 1 was a record-large 79.099 million head, reported economist Steve Meyer of Kerns & Associates. That’s up 1% from a year ago and down 1% from June 1.

The market hog inventory on Sept. 1 was 72.8 million, up 1% from 2019, but down 1% from the previous quarter.

The breeding inventory numbers came in at 6.333 million head, down 2% from a year ago but up slightly from June 1. The June to August 2020 pig crop, at 35.1 million head, was down 3% from 2019. The number of sows that farrowed during this three-month period was down 3% from 2019 at 3.18 million head, which represents 50% of the breeding herd. The average pigs saved per litter was a record high of 11.04 for the June to August period, compared with 11.11 last year.

U.S. hog producers intend to farrow 3.12 million sows during the September to November 2020 quarter, down 5% from the actual farrowing during the same period in 2019 and down 3% from the same period in 2018. Intended farrowings for December 2020 to February 2021, at 3.11 million sows, are down 1% from the same period in 2019, but up slightly from the same period in 2018.

A Dose of Reality

The slaughter during the past quarter has been far lower than implied by the June inventory reports, said Ron Plain, professor emeritus at the University of Missouri-Columbia, during a teleconference funded by the Pork Checkoff on Thursday.

“About a million fewer hogs were slaughtered compared with what the 180 lb. and up group showed. If you look for the whole quarter, over a million fewer hogs were slaughtered than implied by the March numbers,” Plain said.

Why is that? Because it probably reflects reality, Plain said. COVID problems created labor issues for workers, both on farms and in packing plants. The diminished workforce slowed down the rate of getting pigs through the supply chain. In addition, many producers have intentionally slowed growth rates because of concerns that slaughter capacity wouldn’t be there.

“The likelihood is high that USDA numbers are going to come in large relative to slaughter; these numbers may still be too high,” Plain said. “To be able to look at these heavyweight inventories and effectively anticipate slaughter, I think you’re going to have to reduce what we’re going to actually kill off of what the USDA numbers imply is available out there.”

Large Deviations in Weight Categories

The inventory by weight breakdowns piqued economists’ interests again in the September report like it did in June. The report showed large deviations to the upside on the two heaviest weight categories, Meyer said.

The breakdowns versus the expectations follow:
-Under 50 lb.: 22.559 million head, down 3.5% from 2019. Analysts expected that down 2%.
-50 to 119 lb.: 20.490 million head, down 3.5% from 2019. Analysts expected it down 0.3%.
-120 to 179 lb.: 15.547 million head, up 6.1% from 2019. Analysts expected it to increase 1.5%.
-180 lb. and up: 14.169 million head, up 9.8% from 2019. Analysts expected it to increase 2.6%.

“The supply is what it is. We are having a little trouble understanding how these roughly 1.5 million hogs keep getting moved forward in that 180-lb. and up category,” said Len Steiner, president of Steiner Consulting Group in Merrimack, N.H. “Producers must be good at regulating diets to make that happen; it looks a little bit like magic to us. We’re having a little trouble believing they are all going to overwhelm us in the fourth quarter.”

Supply Versus Slaughter Capacity

Kevin Bost, president of Procurement Strategies in Elgin, Ill., agrees it’s hard to understand how the throughput could be slowed down so much.

“I think we just have to be careful about how we forecast the hog slaughter based on the pig crop numbers. The rules have been changed a little bit, temporarily. I think one real issue this raises again is the issue of hog supply versus kill capacity,” Bost said.

With the spring pig crop and market hog inventories unrevised, there clearly should be a bigger hog supply than slaughter capacity (approximately 2.7 million hogs a week) to handle that.

“If the spring pig crop is correct, then we would have to be killing something like 2.75 million a week in October and November to handle that spring pig crop. Well, we’re not going to do that partly because of the slowed down growth rates and partly because labor constraints won’t allow the packing industry to produce that many a week,” Bost said. “We’re looking at the rate of hog slaughter that is constrained by the kill capacity, and not by the hog supply, which means you’re not going to do 2.7 million a week, week after week, for any length of time this fall.”

Exports and the Wild Card

Exports have been one of the key factors influencing hog prices in the U.S. for quite some time, Plain said. A huge chunk of U.S. production goes into exports. He expects strong exports in the coming months and quarters, which will support hog prices.

“If exports are nearly as good as I think they are, then the net domestic pork supplies are going to be down 8% to 9% from a year ago, despite these larger hog inventories,” Bost said.

In addition, Germany’s outbreak of ASF in wild boars has caused an upset in the global pork market. Germany is the second largest supplier of pork to China from the European Union. Steiner said he believes Spain is already shipping as much pork as they can to China so he is optimistic this will create opportunities for the U.S.

Germany was shipping about 35 million pounds of pork per month to China, Bost added. On top of that, Korea shut off German’s pork supply as well, which was an additional 5 to 10 million pounds a month.

That’s a significant quantity, but the analysts said that can always change.

“China’s our biggest card at this point in time that could really mess this up,” Steiner said. “So everybody’s got to watch the China card.”

Farm Journal’s Pork | Jennifer Shike | September 24