USDA’s March 1 Quarterly Hogs and Pigs Report gives U.S. pork producers reasons for optimism as values came in significantly less than pre-report estimates.
“It’s bullish in that it came in well below estimates,” says Altin Kalo of Steiner Consulting in Merrimack, N.H. “However, I think the analyst estimates were anchored by the previous USDA report while the market has been trading the rumors and reality of smaller numbers coming to market each and every week.”
From his perspective, the key takeaway from the report is that hog numbers will be lower than a year ago – and not just this summer, but very likely through the end of this year and early next year.
First, a Look at the Numbers
The total inventory for all hogs and pigs on March 1 was 72.2 million head. That’s down 2% from a year ago, and down 3% from Dec. 1.
The market hog inventory on March 1 was 66.1 million, down 2% from 2021, and down 3% from the previous quarter.
The breeding inventory numbers came in at 6.10 million head, down 2% from a year ago and down slightly from Dec. 1. The December 2021 through February 2022 pig crop, at 31.7 million head, was down 1% from 2021. The number of sows that farrowed during this three-month period was down 1% from 2021 at 2.90 million head, which represents 47% of the breeding herd. The average pigs saved per litter was 10.95 for the December 2021 through February 2022 period, compared with 10.94 last year.
U.S. hog producers intend to farrow 2.99 million sows during the March through May 2022 quarter, down 2% from the actual farrowings during the same period in 2021, and down 5% from the same period in 2020. Intended farrowings for June through August 2022, at 3.03 million sows, are down 1% from the same period in 2021 and down 7% from the same period in 2020.
The revision made to the December 2021 all hogs and pigs inventory was 0.1%. The net revision made to the September 2021 all hogs and pigs inventory was 0.6%. A net revision of 0.1% was made to the June-August 2021 pig crop.
“There are very few revisions and not very large revisions to this report, which did not surprise me that the slaughter numbers have fit USDA’s reports the last couple of quarters,” Steve Meyer of Partners for Production Agriculture, said during a webinar hosted by the Pork Checkoff on March 30. “We're kind of through all the year-over year, screwy numbers they’ve been giving us because of Coronavirus and pig backups. I think we have a pretty good baseline to compare numbers to in this report.”
No Incentive to Expand
One of the more bullish numbers in the report was the downward revision of the breeding herd for December and the decline in the March 1 breeding inventory, Kalo explains.
“At this point the breeding herd is down 6.9% from its peak on Dec. 1,” Kalo says. “Before USDA’s report was published, March 1 inventory was expected to be 5.2% lower than 2019 peak. We don’t know gilt retention, but one way to come up with an estimate is to look at the starting and ending inventory of the breeding stock for the quarter and imports and slaughter during the quarter. Using that approach, we think that gilt retention during the December through February quarter was down 13.5% from the previous year.”
The March 1 report continues to show there is no incentive to expand hog numbers, says John Nalivka, president of Sterling Marketing Inc., in Vale, Ore.
“Going back to 2017, producers began a rapid expansion due to two reasons: new capacity was being built and growing export demand largely driven by China following African swine fever (ASF). Then, when COVID-19 hit the industry in 2020 and processing capacity was slowed significantly, the industry was severely disrupted and losses were significant,” Nalivka says.
This situation has now become the driver to producer decisions concerning herd expansion or contraction, Nalivka says.
"Producers have had to adjust to significantly changing economics over the past 2 years. This is the path going forward,” Nalivka adds.
Last year, USDA reported that producers saved 10.94 pigs per litter during the December 2020 through February 2021 quarter compared to 11 pigs per litter during December 2019 through February 2020, a 0.5% decline.
“This year, the numbers saved per litter were no better than last year,” Kalo says. “Normally we would expect a trend increase of around 0.5-1% in pigs saved per litter. Instead, productivity has taken a step back for two consecutive years. So, you have a shrinking breeding herd and no productivity growth equals lower supplies.”
Kalo says the spring supply looks to be down 3.5% and summer supply appears to be down 1.5% from the already low numbers a year ago. The smaller breeding herd will also limit farrowings and pig crop during Mar-May and thus hog supplies in the fall, which are likely going to be down around 0.5% to 1% from a year ago, depending on productivity.
The industry is fighting a lot of issues with animal health and labor that are keeping those numbers down, Meyer says.
“We have farms that just don't have enough people to attend all those farrowings and that means you lose pigs. There are a lot of reasons for these numbers to be like they are and there's not a lot of real easy solutions,” Meyer says.
Disease, high feed costs, uncertainty about export demand and Prop 12 are all contributing to the continued decline in the breeding stock and tighter hog supplies.
“Ongoing disease issues remain a challenge for producers and have capped supply so far and we do not anticipate a material improvement in supply at least until next spring,” Kalo says. “With persistent high feed costs and regulatory uncertainty, we would be lucky to see more pork come to market in 2023.”
The building cost situation is a big deal, too, Meyer says. Between materials cost and availability of labor to build barns, builders are facing some of the same challenges as packing plants and farms right now.
“The whole situation with Prop 12 means that many of the people that work on our barns are out trying to make farms compliant with Prop 12 so that is standing in the way as well,” Meyer says. “You add those all up and there are a lot of reasons for not much expansion.”
He’s also in the camp that the feed price challenges are not over yet.
“Look at what feed prices have done since December,” Meyer says. “We're not going to have a good crop this year and say, ‘Oh, gee, we got $4 corn and $280 bean meal again.’ That’s not going to happen. This is a major shift that there's still a lot of risk out there. I think our producers are being very cautious about expansion.”
And if someone does put in a sow unit, Meyer says they better know where those pigs are going to get slaughtered because even with the ramp-ups in chain speeds, there’s not a lot of slack in the industry.
“There are a lot of barriers to expansion and barriers to entry right now that are going to stand in the way,” Meyer says. “I think the most obvious way that we can increase production is to increase productivity. We need to get farrowings per animal back up, it's still low relative to history. We need to get litter sizes growing again, back up in the 11 range. We have the genetic capability of doing it.”
Par : Jennifer Shike (30/03/2022)
Source : porkbusiness.com
Photo : National Pork Board and the Pork Checkoff (tirée de l'article original)