Many Market-Ready Hogs with Industry Contraction to Follow

USDA has released the September hogs and pigs report. It shows a record number of animals on hand in the United States. Todd Gleason has more on what this means and how COVID-19 continues to play a role in the red meat sector.

While the USDA reported a record 79.1 million head of hogs and pigs on hand, Jason Franken says the number does not necessarily mean the industry is continuing to expand. The Western Illinois University agricultural economist points out the breeding here is down year-over-year by 1.5 percent.

“That is, for two quarters in a row, the cutting of the breeding herd in response to low prices may be signaling oncoming industry contraction. Even if it is not as strong of a response as anticipated.”

While the breeding herd is down, the number of market hogs is up and heavy. It appears, believes Franken, that although packers made great strides to return slaughter rates above 95 percent of capacity, COVID-19 related labor constraints and producers’ efforts to slow hog growth rates in response to concerns for slaughter capacity are the cause and he says that could be a problem.

“With these market hog inventories and last spring’s pig crop unrevised, hog supply could exceed slaughter capacity this fall, putting downward pressure on near-term prices, despite strong potential for exports.”

On that note, China, Korea, and Japan have temporarily banned pork imports from Germany due to detection of African Swine Fever in wild boars, which could help U.S. pork exports. Pork shipments out of the country are still expected to exceed year-ago levels.

“The USDA estimates U.S. pork exports to be 1.75 and 2 billion pounds in the 3rd and 4th quarters of 2020, or about 16 percent and ten percent greater, respectively than last year. The first quarter of 2021 is forecast to just exceed the record 2.02 billion pounds for the first quarter of 2020, and the second quarter of 2021 is similarly forecast to be about on pace with second quarter of 2020. Hence, export demand is expected to remain strong.”

Even with strong domestic and export demand, Franken says the price pork producers will receive should remain “constrained” for the remainder of 2020.

One final note; USDA has revised its forecast of U.S. per capita pork consumption for this calendar year back up to 51 pounds per person from its earlier estimate of 50.4. Before COVID-19, U.S. per capita pork consumption reached 52.4 pounds in 2019. That was the most pounds of pork annually consumed by individuals since 54.2 pounds record was set back in 1981.