December Quarterly Hogs & Pigs Report Analysis

Ron Plain
December 24, 2014

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This was a slightly bearish report as most key numbers came a bit above the pre-release trade estimates. If USDA's numbers are close to right, 2015 hog slaughter will be around 111.8 million head, up 4.6% from this year, but lower than in 2012 and 2013.

USDA's latest Hogs and Pigs Report said the total inventory of hogs on U.S. farms at the start of December was 66.05 million, up 2.0% from 12 months earlier. (See Table 1 below) The trade was expecting a 1.5% increase. USDA said the market hog inventory was 1.8% larger than a year ago and the number of hogs kept for breeding was up 3.7%. The average of the pre-release trade estimates were for a 1.3% increase in the market hog inventory and a 3.0% increase in the swine breeding herd.

USDA made modest revisions to past inventory estimates to bring them in line with hog slaughter. USDA lowered their estimate of the September market hog inventory by 230,000 head (0.4%) but increased the reported number of sows farrowed during March-May 2014 by 13,000 litters (0.5%) and increased the March-May pig crop by 134,000 (0.5%).

USDA said fall (September-November) farrowings were up 3.3% from a year ago. They said farrowing intentions for winter (December-February) are up 3.9% compared with a year ago and spring (March-May) 2015 farrowings are likely to be up 3.2% compared to 12 months earlier. (See Table 3) This has been a very profitable year for hog producers, so it isn't surprising that the herd is expanding. Fall farrowings were 0.5% lower than trade expectations and 0.7% lower than forecast made in the September inventory survey. USDA's forecast of winter farrowing intentions is 0.1% above both the pre-release expectations and forecast in the September report. Spring farrowing intentions are 0.7% below the trade forecast.

The PED virus has had a big impact on baby pig survival. The number of pigs per litter during September-November, 10.23 head, was up 0.7% from a year ago, which is better than the 1.6% decline in the previous quarter or the 5.5% decline last winter. The trade was expecting a 0.2% decrease in fall pigs per litter. Fall farrowings were up 3.3% and with 0.7% more pigs per litter, the fall pig crop was up 4.0%, which is above the pre-release trade forecast of up 3.3%. Many analysts expect death loss from PED to be much lower this winter than last winter. This would boost hog slaughter next summer.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on December 1 was down 1.5% compared with 12 months earlier. (See Table 2) This doesn't appear to match with ecent slaughter levels. It looks like daily barrow and gilt slaughter in December will be down a bit over 2.6% compared to a year ago. The 120-179 pound market hog inventory was up 0.5% from a year ago. The 50-119 pound inventory group was up 3.4% from a year earlier. The inventory of pigs weighing less than 50 pounds was up 3.5% compared to a year earlier.

Based on the market hog inventory and the expectation of a steady supply of live hog imports, our forecast is for an increase of 1.6% in first quarter 2015 daily hog slaughter. With this level of pork production, we expect 51-52% lean hogs to average in the low $60s live and Iowa-Minnesota negotiated sales to average close to $83/cwt on a carcass weight basis.

For the second quarter of 2015 we expect hog slaughter to be up 4.2% on a daily basis with 51-52% lean hogs averaging in the mid $60s/cwt live and Iowa hogs averaging around $88/cwt on a carcass basis.

With the number of litters farrowed expected to be up 3.9% this winter and pigs per litter up by 3.1 (my guess), the winter pig crop should be 7% or so larger than a year earlier. We are forecasting third quarter 2015 daily slaughter to be up 6.8% compared to a year ago. Look for carcass prices of barrows and gilts to average in the mid $80s/cwt.

The forecast of a 3.2% increase in spring farrowings should add to an increase in litter size to yield a spring pig crop that is up about 6% compared to a year-earlier. We are forecasting fourth quarter 2015 hog slaughter to be up 5.6% on a daily basis.

A big issue not dealt with in the inventory survey is what will happen to slaughter weights. Through mid December barrow and gilt carcass weights have averaged an amazing 3.6% heavier than a year ago. A decline in weights could offset part of the anticipated increased production. Our estimates of slaughter and prices for the next four quarters are in Table 4.

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

 2014 as % of 2013
All hogs and pigs 102.0
Kept for breeding 103.7
Market hogs 101.8

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

Weight Category 2014 as % of 2013
Under 50 pounds 103.5
50 - 119 pounds 103.4
120 - 179 pounds 100.5
180 pounds and over 98.5
Pig Crop
September-November 104.0
Pigs Per Litter
September-November 100.7

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

 2013 as % of 2012
June-August 2013 98.9
September-November 2013 96.3
 2014 as % of 2013
December-February 99.1
March-May 2014 100.1
June-August 2014 100.6
September-November 2014 103.3
 2015 as % of 2014
December-February 103.9
March-May 103.2

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 56.60
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+ 0.0 +0.0 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
Year 110.860+ 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 27.864- 0.8%+0.8%$59.03$80.17$83.45
2 26.765+ 0.4 +0.4 65.46 89.33 91.53
3 27.657- 1.1 -2.6 70.58 95.37 97.90
4 29.791- 2.1 -2.1 61.11 82.36 84.13
Year 112.077- 1.0 -1.0 64.05 86.87 89.57
20141 27.134- 2.6%-2.6%$68.69$95.15$93.22
2 25.574- 4.4 -4.4 85.40115.67113.59
3 25.554- 7.6 -7.6 83.31111.79112.04
4* 28.670- 3.8 -3.8 66.40 88.65 91.50
Year *106.932- 4.6 -4.6 75.95102.83104.18
20151** 27.571+ 1.6%+1.6%$60 - 63$81 - 85$83 - 87
2** 26.660+ 4.2 +4.2 64 - 67 86 - 90 88 - 92
3** 27.305+ 6.8 +6.8 61 - 64 82 - 86 84 - 88
4** 30.294+ 5.7 +5.7 56 - 59 75 - 79 77 - 81
Year** 111.830+ 4.6 +4.6 61 - 64 82 - 86 84 - 88
*estimated
**forecast

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