June Quarterly Hogs & Pigs Report Analysis

Ron Plain
June 30, 2014

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This was a bullish report as the key numbers came in well below the trade estimates. If USDA's numbers are close to right, this year's hog slaughter will be around 110.5 million head, the smallest 2006.

USDA's June Hogs and Pigs Report said the total inventory of hogs on U.S. farms at the start of June was down 4.7% from 12 months earlier. (See Table 1 below) The trade was expecting a 3.0% decrease. USDA said the market hog inventory was 5.1% smaller than a year ago and the number of hogs kept for breeding was down 0.6%. The average of the pre-release trade estimates were for a 1.6% increase in the swine breeding herd and a 3.4% decrease in the market hog inventory.

USDA made downward revisions to past inventory estimates to bring them in line with hog slaughter. USDA lowered their previous estimate of the December market hog inventory by 1,250,000 head (2.0%) and lowered their estimate of the March market hog inventory by 410,000 head (0.7%).

USDA decreased the reported number of sows farrowed during March-May 2013 by 10,000 litters (0.4%). They lowered June-August 2013 farrowings by 12,000 litters (0.4%) and they lowered September-November 2013 farrowings by 102,000 litters (3.5%).

USDA said spring (March-May) farrowings were down 0.3% from a year ago. They said farrowing intentions for summer (June-August) are up 0.1% compared with a year ago and fall (September-November) 2014 farrowings are likely to be up 3.6% compared to 12 months earlier. (See Table 3) Spring farrowings were 2.8% lower than trade expectations and 2.7% lower than forecast made by the March inventory survey. USDA's forecast of summer farrowing intentions is 2.0% below pre-release expectations and 1.9% lower than the March report predicted. Fall farrowing intentions are 1.0% above the trade forecast. USDA says the breeding herd is down 0.7%. The number of litters to be farrowed in the next six months is expected to be up 1.8%.

It is worth noting that by lowering fall 2013 farrowings by 102,000 litters and lowering spring farrowings by 87,000 litters while leaving winter farrowings unchanged, they are saying that fall farrowings were down 3.7% and spring farrowings were down 0.3% but winter farrowings were up 2.8%. That seems an unlikely relationship to me. I expect some downward revision in winter farrowings in the next report.

The PED virus is having a big impact of baby pig survival. The number of pigs per litter during March-May, 9.78 head, was down 5.1% from a year ago, which is slightly better than the 5.5% decline in the previous quarter. The trade was expecting a 4.8% decrease. Spring farrowings were down 0.3% but with 5.1% fewer pigs per litter, the winter pig crop was down 5.4%, which is well below the pre-release trade forecast of down 2.3%.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on June 1 was down 3.8% compared with 12 months earlier. (See Table 2) It looks like daily barrow and gilt slaughter in June was down 4.0% compared to a year ago. The 120-179 pound market hog inventory was down 3.9% from a year ago. The 50-119 pound inventory group was down 5.9% from a year earlier. The inventory of pigs weighing less than 50 pounds also was down 5.9% compared to a year earlier.

Based on the market hog inventory and the expectation of a slow decline in live hog imports, our forecast is for a decrease of 4.3% in third quarter 2014 daily hog slaughter. With this level of pork production, we expect 51-52% lean hogs to average in the mid $90s live and Iowa-Minnesota negotiated sales to average close to $127/cwt on a carcass weight basis.

For the fourth quarter of 2014 we expect hog slaughter to be down 4.8% on a daily basis with 51-52% lean hogs averaging in the upper $70s/cwt live and Iowa hogs averaging around $103/cwt on a carcass basis.

With the number of litters farrowed expected to be up 0.1% this summer and pigs per litter decreasing by 1.5% (my guess), the summer pig crop is likely to be 1.4% smaller than a year earlier. We are forecasting first quarter 2015 daily slaughter to be down 0.5% compared to a year ago. Look for carcass prices of barrows and gilts to average in the low $90s/cwt.

The forecast 3.6% increase in fall farrowings should be offset by a slight decrease in litter size to yield a fall pig crop that is up about 2.5% compared to a year-earlier. We are forecasting second quarter 2014 hog slaughter to be up 2.6% on a daily basis.

Our estimates of slaughter and prices for the next four quarters are in Table 4.

Table 1. Hog Inventories June 1, U.S.

 2014 as % of 2013
All hogs and pigs 95.3
Kept for breeding 99.5
Market hogs 94.9

Table 2. Market Hogs on Farms June 1, U.S.

Weight Category 2014 as % of 2013
Under 50 pounds 94.1
50 - 119 pounds 94.1
120 - 179 pounds 96.1
180 pounds and over 96.2
Pig Crop
March-May 94.6
Pigs Per Litter
March-May 94.9

Table 3. Sows Farrowed and Farrowing Intentions, U.S.

  2013 as % of 2012
March-May 2013 95.1
June-August 2013 98.7
September-November 2013 96.3
 2014 as % of 2013
December-February 2014 102.8
March-May 2014 99.7
June-August 2014 100.1
September-November 2014 103.6

Table 4. Commercial Hog Slaughter and Barrow and Gilt Price by Quarter

Comm. Hog SlaughterBarrows & Gilts, price/cwt
Year & QuarterMillion headPercent Change from year ago51-52% Lean LiveIowa-Minn Base CarcassNon-packer-sold Net Carcass
MonthlyDaily
20091 28.503- 3.7% -2.2% $42.11 $57.23 $60.43
2 27.072- 3.1 -3.1 42.74 57.32 61.76
3 28.428- 0.9 -0.9 38.90 51.43 56.68
4 29.615- 2.0 -2.0 41.20 54.98 57.64
Year113.618- 2.4 -2.0 41.24 55.23 59.11
20101 27.630- 3.1% -3.1% $50.41 $66.81 $68.32
2 26.074- 3.7 -3.7 59.60 79.04 79.42
3 26.930- 5.3 -5.3 60.13 79.44 80.70
4 29.626+ 0.1 +0.1 50.11 65.20 69.26
Year110.260- 3.0 -3.0 55.06 72.67 74.47
20111 27.483- 0.5% -2.1% $59.94 $79.28 $80.63
2 26.110+ 0.1 +0.1 68.80 91.80 92.39
3 27.379+ 1.7 +1.7 71.06 94.03 95.74
4 29.888+ 0.9 +2.5 64.66 85.03 87.39
Year110.860 + 0.5 +0.5 66.11 87.54 89.04
20121 28.105+ 2.3% +2.3% $62.66 $84.78 $86.56
2 26.661+ 2.1 +2.1 61.79 85.45 87.76
3 27.965+ 2.1 +3.8 61.43 83.15 87.69
4 30.433+ 1.8 +0.2 58.63 79.93 82.87
Year113.163+ 2.1 +2.1 61.13 83.36 86.23
20131 27.874- 0.8% +0.8% $59.03 $80.17 $83.45
2 26.778+ 0.4 +0.4 65.46 89.33 91.53
3 27.667- 1.1 -2.6 70.56 95.36 97.90
4 29.808- 2.1 -2.1 61.10 82.36 84.13
Year 112.126- 0.9 -0.9 64.11 86.87 89.57
20141 27.134- 2.6%- 2.6% $68.69 $ 94.97 $ 93.22
2* 25.585- 4.4 - 4.4 80 - 90 114.58 113.59
3** 26.459- 4.3 - 4.3 92 - 96 125 - 130 125 - 130
4** 28.348- 4.8 - 4.8 72 - 80 98 - 108 99 - 109
Year ** 107.525- 4.1 - 4.1 77 - 85 105 - 115 105 - 115
20151** 27.000- 0.5%- 0.5% $65 - 72 $ 88 - 89 $ 90 - 100
2** 26.241+ 2.6 + 2.6 66 - 73 89 - 99 91 - 101
3** 27.362+ 3.4 + 3.4 61 - 69 83 - 93 85 - 95
4** 29.957+ 5.7 - 5.7 55 - 63 75 - 85 77 - 87
Year** 110.557+ 2.8 + 2.8 61 - 69 83 - 93 85 - 95
*estimated
**forecast

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