DES MOINES, Iowa — If uncertainty and upheaval were the mottos for the U.S. pork industry in 2020, the last U.S. Department of Agriculture hogs and pigs report of the year carried that theme through the year’s end.
“It leaves a lot of uncertainty,” said Dale Durchholz of Grain Cycles in Bloomington, Illinois.
Durchholz discussed the report along with Bob Brown, livestock market consultant from Edmond, Oklahoma; Altin Kalo, commodity analyst with Steiner Consulting Group in Manchester, New Hampshire; and Steve Meyer, economist with Partners for Production Agriculture in Ames, Iowa.
They spoke on a Pork Checkoff-sponsored call following the Dec. 23 release of the fourth-quarter USDA hogs and pigs report. The report counts the Dec. 1 inventory of U.S. hogs and pigs.
Between breeding numbers and revisions, the report held surprises for analysts and industry watchers.
The breeding herd was smaller than analysts expected prior to the report. At 6.276 million head, the number was 3% smaller than a year ago and considerably smaller than pre-report estimates that had the number down only 1.8% from a year ago.
“To me, the decline in the breeding herd is one of the more important numbers in this report. It speaks to the uncertainty as far as overall supply for the summer and fall of 2021,” Kalo said.
The September-November farrowings, at 3.164 million head, were down 1% from a year ago and another noticeable difference from the estimates that had that number down almost 4%.
The December-February farrowing intentions were at 3.118 million head, up 1.6% from a year ago and that number was expected to be down 1.7%.
The March-May farrowing intentions, at 3.123 million head, were down 0.8% and was expected to be down 1.4%.
The September-November pig crop of 34.973 million head was down 0.8% and was expected to be down 3.4%.
The analysts on the call agreed that the situation in the U.S. pork industry and meat processing industry due to disruptions from COVID-19 has made it difficult to determine what actual U.S. pig numbers are.
“One thing that adds into this mix that all of us are having is the difficulties we had in the slaughter industry and the shifts in terms of when hogs were slaughtered and how many hogs were potentially euthanized, which we don’t know, and creates a real nightmare for an analyst to use last year’s numbers as a basis. It’s probably going to continue to add some volatility in everybody’s ideas and expectations as we go forward,” Durchholz said.
Kalo said with the slaughter number being the single reliable number that the USDA has to work with, given the upheaval in the U.S. slaughter industry in 2020, it makes the job of accurately estimating hog numbers more difficult.
“We only see the animals when they come to market. Then USDA has to go back and because of all the disruptions of COVID, and some disappearance, it’s a really tough job for USDA to go back and use their regular methods to make some of these adjustments,” Kalo said.
“The yardstick they would have to use to revise or adjust December-February farrowings last year would have been June-August slaughter this past summer. It doesn’t take a rocket scientist to figure out that was a little screwy. It goes back to this thing that the USDA has a hard job in normal times and they didn’t have a good yardstick for this year,” Meyer said.
He also said that the confusion over the numbers in the December report, especially the consternation over the breeding herd and farrowing numbers, just highlights the upheaval on the slaughter side of the industry in 2020 and how that upheaval will affect estimating numbers going forward.
“I think it underscores the fact that the 2020 data is going to be pretty difficult to use as a base for comparison going forward,” Meyer said.
Kalo said the decline in the breeding herd indicates that producers are feeling some uncertainty going forward. He said the breeding herd is the smallest that the industry has seen since 2018 and the quarter-to-quarter decline in the breeding herd of 0.9% is comparable only to a similar decline in December 2014, as porcine epidemic diarrhea virus ravaged U.S. pig farms.
“To me, it underscores some of the decisions and some of the issues that producers are having to deal with, uncertainty in the domestic market as far as demand is concerned, when is demand going to start to kick in, obviously tied to the pandemic. What is going to happen with export demand? Is that going to hold together the way it held together during much of 2020 and in part of 2019? Then you have the uncertainty regarding feed costs to me,” Kalo said.
One area that could provide optimism is exports and cold storage.
Brown said he is optimistic on both fronts.
“The cold storage number for total pork was the lowest for an end of November since 1997. I think we’ve emptied the freezers significantly in April, May and June, and exports have been pretty good. What it says is the freezer won’t be there hanging over the market. One year ago, we were looking at record freezer stocks. Beef is a little different situation but poultry has come down sharply, too. We won’t have the freezer stocks hanging over the market,” Brown said.
Kalo also voiced optimism for the export picture in 2021.
“Even though all the reports out there are that China is ramping up production, you look at their pricing, it’s far higher than it was when they had their last peak in price in 2016. Their pork prices right now are 60% higher than they were in 2016, so they’ve got some ways to go in terms of ramping up their own production. Who knows how things are going to play out but at least in the next 12 to 18 months, we still see a pretty good export outlook, at least from our shop, for U.S. pork exports,” Kalo said.
Dec. 1 Inventory
All hogs and pigs — 77.502 million head, down 0.9% from a year ago.
Breeding herd — 6.276 million head, down 3% from a year ago.
Marketing herd — 71.226 million head, down 0.7% from a year ago.
Under 50 pounds — 21.739 million head, down 1.4% from a year ago.
50 to 119 pounds — 20.260 million head, down 1.8% from a year ago.
120 to 179 pounds — 15.246 million head, even with a year ago.
180 pounds and over — 13.98 million head, up 1.2% from a year ago.
September-November — 3.164 million head, down 1% from a year ago.
December-February — 3.118 million head, up 1.6% from a year ago.
March-May — 3.123 million head, down 0.8% from a year ago.
Pig Crop — 34.973 million head, down 1.4% from a year ago.
Pigs Saved Per Litter — 11.05, down from last year, which was 11.09.