DES MOINES, Iowa — U.S. pork producers won’t see too much letup from backed-up supplies of market-ready hogs, low prices and uncertainty about demand.
That was the message repeated, in different ways, during a Pork Checkoff-sponsored media call following the release of the second-quarter U.S. Department of Agriculture hogs and pigs report.
“A lot of hogs we still have left to deal with, so not a lot of help on the supply side from a price standpoint,” said Scott Brown, associate extension professor in the University of Missouri College of Agriculture, Food and Natural Resources.
That statement was confirmed by the numbers.
The all hogs and pigs on hand in U.S. farms as of June 1 was 79.634 million, a “record large” number, noted Steve Meyer of Kerns and Associates.
That number was 5.2% larger than a year ago and significantly higher than analysts’ pre-report estimates of being up 3.7% from a year ago.
One of the most anticipated numbers, with the report counting the numbers of pigs on hand as of June 1, was how many hogs have been euthanized or otherwise taken out of the commercial supply chain, as slaughter plants slowed and closed due to COVID-19.
David Miller, chief economist with Decision Innovation Solutions, based in Urbandale, Iowa, uses a weekly model to calculate disappearance. He said using that model and reconciling his numbers with the June 1 report numbers, he estimates around 2.1 million hogs were either euthanized or were moved through direct sales in the second quarter.
“My numbers would suggest we have something close to 3.4 million hogs backed up waiting slaughter, and this would suggest that is probably closer to 2.1 million backed up, so there’s 2 million head that disappeared someplace,” Miller said.
While 2 million head have disappeared, Miller said there are plenty more coming at the market over the remainder of 2020.
“As I look forward on the model, if there’s a concern I have, it’s that we are going to run well above 2.7 million head of market-ready hogs coming at the market almost every week during all of October and November, very heavy runs ahead of us,” Miller said.
How quickly the U.S. economy and particularly the hospitality industry, including restaurants and hotels, can recover and get back to normal or something close to it could hold the key to how quickly the U.S. pork industry can do the same.
“I think the key to the fall is probably going to be how well does the hotel/retail/institutional trade return to the market as the economy opens up and schools open up and those kinds of things. We’re still seeing a lot of large events still being canceled. There’s a lot of optimism about schools opening up and those types of things. I think that sector is very important to the pork demand picture, and that’s going to be one of the keys,” Miller said.
Brown said he sees a bearish period going forward.
“I continue to become a little more bearish that the general economy turndown is worse than I would have thought earlier on,” he said.
That outlook was exacerbated by the numbers in the June report.
“It’s a bad combination of more hogs than we would have anticipated and frankly, not that much adjustment of breeding inventory relative to maybe what we would have thought, now against what could be a softer demand picture as we go through the remainder of 2020,” Brown said.
One bright spot for the industry has been exports and that continues to be the case, in spite of the global pandemic.
“When we talk about demand, exports are tremendously important. We’ve seen, for the first part of the year, rather strong demand for pork exports,” said Lee Schulz, associate professor at Iowa State University.
Schulz said the futures market also is anticipating better times.
“There are some bits of optimism when we talk about a demand-driven recovery, and I think the futures prices are somewhat reflecting that, especially when you look into the deferred contract,” Schulz said.
Analysts are asked to give their hog price forecasts, using the pricing model of their choice.
Scott Brown — World Agricultural Supply and Demand Estimates reports national base live equivalent, 51/52% live pricing model, price per hundredweight:
First quarter 2020 — $42.50
Second quarter 2020 — $40
Third quarter 2020 — $40
Fourth quarter 2020 — $37
First quarter 2021 — $43
Lee Schulz — Iowa/Minnesota producer-sold all-purchaser agreement, carcass base price, price per hundredweight:
First quarter 2020 — $61
Second quarter 2020 — $57
Third quarter 2020 — $51
Fourth quarter 2020 — $53
First quarter 2021 — $62
Second quarter 2021 — $69
David Miller — Overall producer-sold weighted average price, price per hundredweight:
First quarter 2020 — $60.85
Second quarter 2020 — $57.76
Third quarter 2020 — $52.20
Fourth quarter 2020 — $44.89
First quarter 2021 — $51.72
Second quarter 2021 — $57.76
All hogs and pigs: 79.634 million
Breeding herd: 6.326 million
Marketing herd: 73.308 million
Under 50 pounds - 22.16 million
50 to 119 pounds - 20.37 million
120 to 179 pounds - 16.09 million
180 pounds and over - 14.687 million
March-May farrowings: 3.172 million
June-August farrowing intentions: 3.123 million
September-November farrowing intentions: 3.09 million
March-May pig crop: 34.933 million
March-May pigs saved per litter: 11.01