March Quarterly Hogs & Pigs Report Analysis

Ron Plain
March 30, 2015

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USDA's March Hogs and Pigs report is slightly bearish regarding hog prices over the next few months (the market hog inventory is higher than expected), but it is bullish for late 2015 and early 2016 as farrowing intentions are lower than expected. If USDA's numbers are right, 2015 hog slaughter will be around 113.6 million head, up 6.3% from last year and the second highest ever after 2008.

USDA's latest Hogs and Pigs Report said the total inventory of hogs on U.S. farms at the start of March was 65.934 million, up 7.2% from 12 months earlier. (See Table 1 below) The trade was expecting a 6.8% increase. USDA said the market hog inventory was 7.7% larger than a year ago and the number of hogs kept for breeding was up 2.2%. The average of the pre-release trade estimates were for a 7.2% increase in the market hog inventory and a 3.5% increase in the swine breeding herd.

USDA made revisions to past inventory estimates to bring them in line with hog slaughter. USDA raised their estimate of the September market hog inventory by 848,000 head (1.4%) and raised their estimate of the December market hog inventory by 125,000 (0.2%). They increased the number of sows farrowed during June-August 2014 by 85,000 litters (2.9%) and increased the June-August pig crop by 868,000 (2.9%). In a rare move, they lowered their estimate of the December breeding herd inventory by 30,000 head (0.5%).

USDA estimated winter (December-February) farrowings were up 2.4% from a year ago. They said farrowing intentions for spring (March-May) are up 2.1% compared with a year ago and summer (June-August) 2015 farrowings are likely to be down 2.1% compared to 12 months earlier (See Table 3). Winter farrowings were 1.3% lower than trade expectations and 1.5% lower than forecast made in the December inventory report. USDA's forecast of spring farrowing intentions is 1.0% below the pre-release expectations and 1.1% below the forecast in the December report. Summer farrowing intentions are a big 4.8% below the average trade forecast.

The PED virus had a big impact on baby pig survival last year. From December 2013 through May 2014, pigs per litter were down 5.3% compared to a year earlier. Death loss was much less this winter. The number of pigs per litter during December-February, 10.17 head, was the highest ever for the winter quarter. The year-over-year increase, 6.7%, was more than double any other quarter in the last 30 years. The trade was expecting a 5.3% increase in winter pigs per litter. The winter pig crop was up 9.2%, which is the same as the pre-release trade forecast and the biggest quarterly increase since the fall of 2007.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on March 1 was up 8.9% compared with 12 months earlier. (See Table 2) This looks a tad bit low compared to actual slaughter this month. It looks like daily barrow and gilt slaughter in March will be up a bit over 9.3% compared to a year ago. The report said the 120-179 pound market hog inventory was up 6.0% from a year ago. The 50-119 pound inventory group was up 6.6% from a year earlier. The inventory of pigs weighing less than 50 pounds was up 9.4% 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 6.5% in second quarter 2015 daily hog slaughter. With this level of pork production, we expect 51-52% lean hogs to average in the low $50s live and Iowa-Minnesota negotiated sales to average close to $70/cwt on a carcass weight basis.

For the third quarter of 2015 we expect hog slaughter to be up 9.2% on a daily basis with 51-52% lean hogs averaging in the low to mid $50s/cwt live and Iowa hogs averaging around $70/cwt on a carcass basis.

With the number of litters farrowed expected to be up 2.1% this spring and pigs per litter up by 4.7 (my guess), the spring pig crop should be 7% or so larger than a year earlier. We are forecasting fourth quarter 2015 daily slaughter to be up 4.1% compared to a year ago. Look for carcass prices of barrows and gilts to average in the mid $60s/cwt.

The forecast of a 2.1% decrease in summer farrowing intentions should partially offset an increase in litter size to yield a summer pig crop that is up about 1% compared to a year-earlier. We are forecasting first quarter 2016 hog slaughter to be up 1% on a daily basis.

Through mid March barrow and gilt carcass weights have been above the year-earlier level for 103 consecutive weeks. A decline in weights could offset part of the anticipated increased production coming from increased slaughter.

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

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

 2015 as % of 2014
All hogs and pigs 107.2
Kept for breeding 102.2
Market hogs 107.7

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

Weight Category 2015 as % of 2014
Under 50 pounds 109.4
50 - 119 pounds 106.6
120 - 179 pounds 106.0
180 pounds and over 108.9
Pig Crop
December-February 109.2
Pigs Per Litter
December-February 106.7

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 103.5
September-November 2014 103.3
 2015 as % of 2014
December-February 102.4
March-May 2015 102.1
June-August 2015 97.9

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$94.99$93.22
2 25.574- 4.4 -4.4 85.40115.71113.59
3 25.554- 7.6 -7.6 83.31112.04112.04
4* 28.617- 3.9 -3.9 66.75 88.84 92.16
Year *106.878- 4.6 -4.6 76.04102.93102.79
20151* 28.712+ 5.8%+5.8% $48.05 $64.07 $66.50
2** 27.238+ 6.5 +6.5 50 - 54 68 - 72 70 - 74
3** 27.898+ 9.2 +9.2 51 - 55 68 - 72 70 - 74
4** 29.800+ 4.1 +4.1 49 - 53 62 - 66 64 - 68
Year** 113.648+ 6.3 +6.3 49 - 53 66 - 70 68 - 72
*estimated
**forecast

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