As of March 1, the U.S. inventory of hogs and pigs was 77.6 million head. That’s up four percent from one year ago and down one percent from December of 2019. The breeding hog inventory at 6.3 million was up slightly from last year, but down one percent from last quarter. The market hog inventory totaled 71.3 million head, up four percent from last year and down one percent from last quarter. Jim Mintert, who is the director of the Purdue Center for Commercial Agriculture, expects the demand side of the market to be the primary driver in the upcoming weeks. Mintert says demand for hams and pork loins has held up, but the pork belly values are down significantly.
“Pork bellies are heavily used in the hotel and restaurant institutional trade, and I suspect that we’re seeing that be reflected in the weakness in those belly prices. As you go forward, I think the real concerns is going to be what happens to pork product prices, and in turn, hog prices, as we see the impacts of COVID-19 spill over into increasing unemployment, lower consumer income levels, and also the potential impact with respect to pork imports. Pork exports have become an incredibly important source of pork demand. We export more than 20 percent of U.S. pork production, so there continues to be some concerns there. Obviously, some expectations for strong export growth going to China remains somewhat up in the air with respect to how rapidly the Chinese economy recovers, and how rapidly we can see larger shipments take to China to alleviate their shortages of protein, animal protein, in particular, pork, because of the African Swine Fever problem.”
Reflecting on the supply side of the equation, New Frontier Capital Markets President Daniel Bluntzer is concerned about the big decline in the size of the breeding herd from December to March.
“You’d have to go all the way back to the 98-99 debacle in hogs to find a decline that large in the breeding herd. To me, it throws a red flag up because we’re not going through what we went through in 98 and 99. That really carries over the expectations for production for the rest of the year, but when you run the numbers at face value for the pig crops that we got, the revisions as well as the expectations for farrowing moving forward, I’m coming up with numbers for total slaughter in the U.S. at about 3.6 percent above a year ago. That would be 133.8 million head. As far as the quarterly breakdowns, starting with the third quarter, that would be up 3.7 percent, then 3.1 percent, and then roughly unchanged to down a little bit for Oct-Dec.”