URBANA, Ill. — The U.S. Department of Agriculture’s latest hog and hog report puts the Dec. 1 inventory of all hogs and hogs at 74.2 million head, down about 1% from in the last quarter and 4% lower than the same period last year, compared to an average estimate before the report of only 2.8% lower.
This is the smallest December count since 2017, according to Jason Franken, an agricultural economist at Western Illinois University and contributor to the University of Illinois farmdoc team.
“While pre-report expectations put the breeding herd just 0.1% higher than a year ago, market hog inventory is also down about 4.5% from expectations of only 2.9% lower. All market hog inventory weight classes are down from the same time last year, and all but the 50-119 pound class are down more than expected prior to the report,” Franken said.
The two heaviest weight classes of 120-179 pounds and over 180 pounds are about 6% lower than a year ago, and 2.5% and 3% lower than pre-report expectations, respectively. . Those estimates were a bit more accurate for lighter pigs, Franken said.
The 50-119 pound class is 2.5% lower, compared to expectations of 2.7% lower, while under 50 pound inventory is 3.7% lower than there is one year, only 0.8% less than expected.
“Overall, there are almost 4% fewer hogs weighing less than 180 pounds than a year ago, and these will be market hogs arriving at processing plants from January to May 2022. These numbers and the calving estimates add bullish sentiment,” Franken said.
“The drop in the number of lighter pigs partly reflects the fact that the pig harvest from September to November is 3.6% lower than last year, despite a record number of pigs saved per litter, as 4 .8% fewer sows were farrowed for the period, compared to expectations of only 3.1% fewer.
“The record 11.19 pigs saved per litter continues the upward trend seen over the past decade. Still, a smaller fall hog crop, resulting from fewer sows farrowed, should mean an equally small slaughter this spring.
Meanwhile, winter whelping intentions are up almost 0.5% from actual whelping last year, versus expectations of 0.8% higher. Spring calving intentions are down about 0.8% from a year ago, versus expectations nearly 0.2% higher.
Lower than expected farrowing intentions, unless offset by pigs per litter pushing even higher, should result in lower stocks later on, Franken said.
Frozen meat stocks remain low. According to the USDA’s cold storage warehouse report, cold hog inventories as of November 30 are down 8% from the previous month and 3% from a year ago, which was previously the level the lowest for pork since the start of the COVID-19 pandemic.
Meanwhile, poultry inventories were down 17% from the previous month and 18% from a year ago, while beef was up 4% from the previous month and 4% from a year ago. compared to last year.
The USDA estimates per capita pork consumption in the United States at 50.9 pounds per person for 2021 and projects that number to drop to 49.9 pounds per person in 2022. Prior to COVID-19, pork consumption per living in the United States reached 52.4 pounds in 2019, the highest level ever. since it was 54.2 pounds in 1981.
“With this outlook for domestic consumption, the market will once again turn to exports to help support prices,” Franken said.
The United States exported 541 million pounds of pork in October, down nearly 8.5% from October 2020, largely due to a 62.7% drop in shipments to China and Hong Kong. Kong, which was only partially offset by stronger exports to Mexico and other parts of Latin America.
Weaker than expected October pork exports led to a reduction of 30 million pounds from the fourth quarter export estimate, now at 1.8 billion pounds, bringing the total for 2021 down to 7.2 billion pounds, almost 2% below the 2020 level.
For 2022, the first and second quarters, respectively, are expected to be approximately 9.2% and 2.2% lower than prior year levels, while the third quarter is expected to be 11.7% higher. So while weaker export demand is forecast for the first half of 2022, it is expected to rebound later in the year.
“Overall, recent reports offer some optimism for hog prices,” Franken said. “The forecast presented here is for the national average net price weighted on a carcass basis for all transactions of barrows and gilts sold by producers, including negotiated and contracted prices. This net price should better reflect what producers receive and normally corresponds to a premium of more than 2 dollars per quintal over the base price on average. From October to December, this net price averaged $79.56 per quintal compared to $63.84 per quintal for the corresponding net prices for negotiated or spot transactions.
In general, hog prices tend to be higher in the second and third quarters, with lower prices in the first and fourth quarters, Franken said.
Consistent with this trend, this forecast puts Q1 prices at around $80.83 per cwt, rising to $91.37 per cwt and $92.93 per cwt in the second and third quarters, respectively, before dropping to $83. $.27 per cwt for the fourth quarter.
“These projections assume that domestic demand remains at current levels and export demand increases in the second half of the year. A big wild card, on this front, could be how African swine fever could affect competitors in export markets Of course, if the demand is weaker or the pork supply turns out to be larger than expected, lower prices can be achieved,” Franken said.