Pig and Hogs Look “Bearish” to Economists

The inventory of U.S. hogs and pigs at the beginning of June was 79.6 million head. That’s five percent higher than last year. The breeding herd inventory, at 6.3 million head, was down one percent from last year. The market hog inventory, at 73.3 million head, was up six percent. University of Missouri-Columbia Extension professor Scott Brown says it is obvious a large number of hogs still need to come to market.

“It’s hard to find too many things on the positive side of this report, by and large. To me, a lot of the news that we got out of this report is bearish. It reminds me to keep saying that the aggregate supply of hogs is very inelastic to low returns.”

Iowa State University associate professor Lee Schultz said this report will be scrutinized closely to determine if the numbers match up with slaughter levels. The March-May farrowings number was larger than expected.

“The biggest increase came in April and May, with sow farrowing up 2.8 percent and 1.3 percent respectively. So, even though we’ve seen commensurate pigs say, per litter, just roughly what they were last year, a little bit higher at .5, you did see that larger sows farrowing that did give us that much bigger pig crop. To give you an idea when you look at farrowing intentions, they added 53,000 sows farrowing from the second intentions from that March-May to what we’ve seen as the actual sows farrowing, so that was up 1.7 percent from that first intentions number. As we see farrowing intentions for June, August, and September-November, those are well-below year-ago levels but just given that trend and what the size of that breeding herd is, those numbers could come in higher than what this report is suggesting, which is going to lead to larger pig crops and more supply on the market.”

Decision Innovation Solutions Chief Economist David Miller estimates 2.1 million head of hogs were euthanized or marketed through direct sales. Miller expects very large runs of hogs to be coming to market nearly every week.

“After we get through July, we’re going to make a little headway in July on cutting into the slaughter backlog, but once we get out to Labor Day, we’re going to start backing up hogs again, probably to the tune of about 100-to-200,000 a week.”

Miller anticipates “huge” hog slaughter levels this fall, keeping the market under pressure. Continued uncertainty about the economy will be a factor in the months ahead. Schultz sees the possibility of stronger demand in late 2020 and early 2021.

“There are some bits of optimism when we talk about a demand-driven recovery. I think the futures prices are somewhat reflecting that, especially when you look into the third contract. Also, when we talk about demand, exports are tremendously important here, and we’ve seen, for the first part of the year, at least, rather strong demand for pork exports. Obviously, as values have become higher, that’s going have an impact, and we know economies worldwide have been impacted by this situation, so that’s something to monitor, but overall demand has been pretty strong coming into this situation. It’s really what that recovery demand-pull will be out of it. And, looking at futures prices, I think looking further out, there is a bit of optimism there.”