September Quarterly Hogs & Pigs Report Analysis

Ron Plain
September 29, 2014

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This was a bearish report as the key numbers all came in above the pre-release trade estimates. If USDA's numbers are close to right, 2015 hog slaughter will be around 110.6 million head, up 3.1% from this year, but lower than in 2011, 2012 and 2013.

USDA's September Hogs and Pigs Report said the total inventory of hogs on U.S. farms at the start of September was 65.361 million, down 2.3% from 12 months earlier. (See Table 1 below) The trade was expecting a 3.4% decrease. USDA said the market hog inventory was 2.7% smaller than a year ago, but the number of hogs kept for breeding was up 1.8%. The average of the pre-release trade estimates were for a 1.4% increase in the swine breeding herd and a 3.8% 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 March market hog inventory by 995,000 head (1.8%) and lowered their estimate of the June market hog inventory by 545,000 head (1.0%). USDA decreased the reported number of sows farrowed during December-February 2013 by 102,000 litters (3.6%) and reduced the Dec-Feb pig crop by 980,000 (3.6%).

USDA said summer (June-August) farrowings were up 0.6% from a year ago. They said farrowing intentions for fall (September-November) are up 4.0% compared with a year ago and winter (December-February) 2015 farrowings are likely to be up 3.8% compared to 12 months earlier. (See Table 3) Summer farrowings were 0.2% higher than trade expectations and 0.5% higher than forecast made by the June inventory survey. USDA's forecast of fall farrowing intentions is 0.8% above pre-release expectations and 0.4% higher than the June report predicted. Winter farrowing intentions are 2.1% above the trade forecast. USDA says the breeding herd is up 1.8%. The number of litters to be farrowed in the next six months is expected to be up 3.9%. In recent years, farrowing intentions have been a better predictor of future hog slaughter than has the breeding herd inventory.

The PED virus is having a big impact of baby pig survival. The number of pigs per litter during June-August, 10.16 head, was down 1.6% from a year ago, which is better than the 5.1% decline in the previous quarter or the 5.5% decline last winter. The trade was expecting a 2.8% decrease in summer pigs per litter. Summer farrowings were up 0.6% but with 1.6% fewer pigs per litter, the summer pig crop was down 1.1%, which is above the pre-release trade forecast of down 1.9%.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on September 1 was down 5.7% compared with 12 months earlier. (See Table 2) It looks like daily barrow and gilt slaughter in September was down a bit over 6% compared to a year ago. The 120-179 pound market hog inventory was down 3.5% from a year ago. The 50-119 pound inventory group was down 1.7% from a year earlier. The inventory of pigs weighing less than 50 pounds was down 1.5% 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 a decrease of 2.9% in fourth quarter 2014 daily hog slaughter. With this level of pork production, we expect 51-52% lean hogs to average in the high $60s live and Iowa-Minnesota negotiated sales to average close to $92/cwt on a carcass weight basis.

For the first quarter of 2015 we expect hog slaughter to be up 0.3% on a daily basis with 51-52% lean hogs averaging in the mid $60s/cwt live and Iowa hogs averaging around $90/cwt on a carcass basis.

With the number of litters farrowed expected to be up 4.0% this fall and pigs per litter down by 1.0% (my guess), the fall pig crop should be 3.0% or so larger than a year earlier. We are forecasting second quarter 2015 daily slaughter to be up 3.0% compared to a year ago. Look for carcass prices of barrows and gilts to average in the low $90s/cwt.

The forecast 3.8% increase in winter farrowings should add to an increase in litter size to yield a winter pig crop that is up about 4.6% compared to a year-earlier. We are forecasting third quarter 2015 hog slaughter to be up 4.7% on a daily basis.

A big issue not dealt with in the inventory survey is what will happen to slaughter weights. Through mid September barrow and gilt carcass weights have averaged an amazing 4.2% 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 September 1, U.S.

 2014 as % of 2013
All hogs and pigs 97.7
Kept for breeding 101.8
Market hogs 97.3

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

Weight Category 2014 as % of 2013
Under 50 pounds 98.5
50 - 119 pounds 98.3
120 - 179 pounds 96.5
180 pounds and over 94.3
Pig Crop
June-August 98.9
Pigs Per Litter
June-August 98.4

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 2014 99.2
March-May 2014 99.7
June-August 2014 100.6
September-November 2014 104.0
 2015 as % of 2014
December-February 2014 103.8

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 27.864- 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 70.56 95.36 97.90
4 29.791- 2.1 -2.1 61.10 82.36 84.13
Year 112.077- 1.0 -1.0 64.11 86.87 89.57
20141 27.134- 2.6%- 2.6% $68.69 $ 94.97 $ 93.68
2* 25.574- 4.4 - 4.4 85.40 115.41 116.92
3** 25.600- 7.4 - 7.4 83.60 111.10 114.40
4** 28.930- 2.9 - 2.9 68 - 72 92 - 96 94 - 98
Year ** 107.236- 4.3 - 4.3 76 - 78 103 - 105 105 - 107
20151** 27.216+ 0.3%- 0.3% $66 - 70 $ 88 - 93 $ 90 - 95
2** 26.340+ 3.0 + 3.0 67 - 71 90 - 95 92 - 97
3** 26.800+ 4.7 + 4.7 66 - 70 88 - 93 90 - 95
4** 30.250+ 4.6 + 4.6 57 - 61 76 - 81 78 - 83
Year** 110.606+ 3.1 + 3.1 64 - 68 86 - 91 88 - 93
*estimated
**forecast

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