All Hog and Breeding Herd Inventories Up 1%
Tortoise-slow expansion pace should help prolong pork profits.
John Otte
Published: Apr 3, 2006
Friday's USDA Hogs and Pigs Report shows the March 1, 2006 U.S. hog inventory up 1% from a year earlier. Almost all numbers are within fractions of a percent of pre-report trade guesses.
After 26 months of profits the hog production industry shows no rapid expansion. So why is the industry reacting less - or at least expanding more slowly - than in the past in response to profits?
Four factors stifle expansion
"First and foremost, little incremental growth occurs on hog farms today," says Steve Meyer, Paragon Economics, Adel, Iowa. "Few producers will build a little more space and add a few sows. Even fewer producers will keep or buy a few gilts and farrow them in temporary or outside facilities.
"When hog farms expand today, they do it in increments of at least 1,200 sows and probably in chunks of 3,400 or 5,000 sows," he adds. "Expansion is a big decision and takes time to execute."
Second, many producers have found the permitting process to be even slower than they had expected. This expected breeding herd would mean we have added only 48,000 sows since last June. Last summer many analysts expected the current expansion would be up 200,000 or so sows by now. Some consultants still have lists of over 100,000 sows that are somewhere in the planning-permitting-building process.
Third, sites where one can wisely locate a hog operation are becoming increasingly scarce. Even fewer places exist where a producer can build without big headaches.
Finally, building costs have risen dramatically due to energy prices, a strong world economy and last year's hurricanes.
Producers focus on efficiency
Since 1998-99 amplitude in quarter-to-quarter variability in both sow farrowings and litters per breeding animal have diminished considerably. The likely explanation - the late 1998 hog price wreck caused industry players who did not have deep pockets to exit the industry. The likely reason they did not have deep pockets was they were not the most efficient producers.
Remaining producers focus on efficiency. A key factor in capturing those efficiencies is running fixed facilities at capacity all of the time.
Looking at the numbers
The 6.03 million head breeding herd inventory, was up 1% from last year and up slightly from the previous quarter. Market hog inventory, at 54.1 million head, was up 1% from last year but down 2% from last quarter.
Producers told USDA they farrowed 25.654 million pigs from December 2005-February 2006. That's up 1% from 2005 and up 2% from 2004. The average trade guess was 25.799 million, a mere half percent difference.
The average pigs saved per litter was 9.03 for the December 2005-February 2006 period, compared to 8.94 last year. U.S. hog producers intend to farrow 2.90 million sows during the March-May 2006 quarter, up 1% from the actual farrowings during the same period in both 2004 and 2005.
Intended farrowings for June-August 2006, at 2.92 million sows, are up slightly from 2005 and up 1% from 2004. The total number of hogs under contract, owned by operations with over 5,000 head, but raised by contractees, accounted for 39% of the total U.S. hog inventory, unchanged from last year.
Permalink: Click here
Tagged: usda, gilts
|