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Hogs and Pigs Report is Market Friendly

Plunge in pigs per litter suggests PEDV death losses are real. No hog herd or pork production expansion is near. A hog supply squeeze is coming.

Published on: Dec 27, 2013

The key inventory numbers - all hogs and pigs, breeding herd and market herd - came in on the market friendly side of average trade guesses in Friday’s USDA Hogs and Pigs Report. Hog prices should open higher Monday morning.

USDA tallied the all hog and pig inventory on Dec. 1, 2013 was 65.940 million head. This was down 1% from Dec. 1, 2012, and down 2% from Sept. 1, 2013. 

Breeding inventory, at 5.757 million head, was down 1% from last year and down 1% from the previous quarter.

Market hog inventory, at 60.183 million head, was down 1% from last year and down 2% from last quarter.

The September-November 2013 pig crop, at 29.298 million head, was down slightly from 2012. Sows farrowing during this period totaled 2.882 million head, down slightly from 2012. The sows farrowed during this quarter represented 50% of the breeding herd.

MARKET FRIENDLY: Latest Hogs and Pigs report shows impact of PEDv on herds.
MARKET FRIENDLY: Latest Hogs and Pigs report shows impact of PEDv on herds.

The average pigs saved per litter was a record high for the September-November quarter at 10.16, compared to 10.15 last year. Pigs saved per litter by size of operation ranged from 8.00 for operations with 1-99 hogs and pigs to 10.20 for operations with more than 5,000 hogs and pigs.

However, the most recent trend in pigs per litter is alarming. By month USDA pegged:

* August pigs per litter at 10.38 vs. 10.12 last August.

* September pigs per litter at 10.28 vs. 10.13 last year.

* October pigs per litter at 10.17 the same as last year.

* November pigs per litter at 10.04 DOWN from 10.16 in November 2012.

November marked the first month in well over four years that litter rate dipped below the same month a year earlier. The implication - PEDV death losses are real. A hog slaughter squeeze will come in May-June.

Farrowing intentions do suggest producers intend to boost efficiency by farrowing more litters from a smaller breeding herd.

Hogs and Pigs Report is Market Friendly

PEDV confirmations surge. Testing data from the National Animal Health Laboratory Network confirm that the Porcine Epidemic Diarrhea virus PED virus had been found on 1,645 swine premises in 20 states as of December 8. This is up 132 locations from the week before. This was the second largest weekly rise after the 141 premises added the previous week.

Iowa accounts for 34% of the positive cases. The data contain an unknown amount of double counting. For example, suppose 2 months ago a sow unit submitted a sample. It proved positive. Last week that sow unit submitted another sample. It, too, was positive. That operation is counted twice in the confirmed premises tally.

Spring slaughter hog squeeze likely. The recent surge in facilities confirmed to have PEDV has traders on edge as they attempt to size up how severe the April, May, June slaughter hog pinch will be. That pinch will occur when hog supplies are tightening seasonally. That sets the stage for a potential larger than normal seasonal price rally just as consumers think about lighting charcoal for grilling. Traders will be talking about $110 summer hogs.

PEDV outbreaks seem to be more severe in cold weather. The coldest part of the winter is immediately ahead. Severe PEDV losses could continue into spring.

Management strategies vary. Iso wean pigs are selling around $80, upwards to as high as $87. Strong iso wean prices suggest some producers expected to get feeder pigs from sow units that have been lost to PEDV. They could be scrambling to find pigs to fill finishing units. Such producers should push a pencil. On one hand, keeping the finisher filled spreads the fixed costs over the most pigs. On the other hand, at some point feeder pig prices may rise high enough to negate the advantage of spreading the fixed costs over the most output possible.

Costs to produce an iso wean pig run about $40 a head. Trade chatter suggests some pig finishers, who have interests in sow units, are selling the pigs when their turn comes up, rather than taking them and putting them in their finishing units. Their logic - if they can double the $40 cost by selling the pig at $80, they pocket most, possibly all, of the profit they’d get from finishing. Plus they save feed, save labor, avoid the risk of death loss on pigs in the finisher. But they do have to pay the fixed costs on finishing units they own.

PEDV creates both problems and opportunities. How should producers evaluate them? Identify costs, market prices, price prospects, risk of death loss and calculate potential profits for various alternatives.

Trade chatter hints that some packers are already stashing more pork in cold storage to be available during the potential supply shortage.