DES MOINES, Iowa — Despite a slight drop in hog numbers last month, U.S. producers are increasing production – and are even planning to bring more new plants online later this year.

 

“Expansionary momentum has been in place since 2014,” said Kevin Bost, president of Procurement Strategies, Inc. in Des Plaines, Ill., in a March 30 teleconference with reporters on the USDA March 1 Quarterly Hogs & Pigs report.

 

“These are long-term capital investments,” he added. “The switch has turned on for expansion by default, until profitability and financing tell us otherwise. We’re still on this moderate expansion path and it isn’t going to change anytime soon.”

 

Daniel Bluntzer, a partner at New Frontier Capital Markets, LLC in Corpus Christi, who joined Bost and Len Steiner, president of Steiner Consulting Group in New Hampshire, in analyzing the report, agreed.

 

“The financial interests are there to expand,” Bluntzer said. “If (meatpackers) are spending that much money to build new plants, they’re going to make sure the hogs are there.”

 

For example, in mid-February, Seaboard Triumph Foods announced plans to expand its new pork processing facility in Sioux City, Iowa, to include the addition of a second shift, which company officials said will allow processing of up to about 6 million hogs annually. “Producers have expanded more over the last six months in anticipation of those plants,” he explained.

 

Sponsored by the pork checkoff in Des Moines, the report stated total U.S. hogs numbers for the first quarter of 2017, at 71 million head, dropped 1 percent since last December but are up 4 percent from March 2016. As the nation’s top hog producer, Iowa had 21.8 million hogs and pigs, down 3 percent from the previous quarter but up 8 percent from last March.

 

North Carolina had the second-largest inventory with 9.2 million animals, and Minnesota, the third-largest with 8.3 million. In Illinois, the total inventory of all hogs and pigs was 5.25 million, up 3 percent from Dec. 1 and up 2 percent from last year.

 

In Indiana, the total hog and pig inventory was estimated at 4.1 million, up 350,000 from a year ago. In Michigan, the total hog and pig inventory was estimated at 1.11 million, down 60,000 from last March.

 

In Ohio, the total hog and pig inventory was estimated at 2.65 million, unchanged from last March. (Total hog numbers for Kentucky and Tennessee were not included in the March report.)

 

The report said the U.S. breeding inventory, at 6.07 million head, was up 1 percent from last year but down slightly from the previous quarter. The U.S. market hog inventory, at 64.9 million head, was up 4 percent from last year but down 1 percent from last quarter. Moving forward, Steiner said U.S. producers need to watch three main points: exports, domestic consumption and new plant construction.

 

“Exports represent 21.7 percent of all pork produced in this country,” he said. “We have to expand that in total pounds and as a percentage of the amount of pork produced. If either consumption doesn’t increase or exports don’t happen, you have problems.”

 

But, he said U.S. producers “still have money in their pockets from the good prices in 2014, and they see potential with good demand and strong exports.”

 

The report stated the December 2016-February 2017 pig crop, at 31.4 million, was up 4 percent from 2016. Sows farrowing during this period totaled 3.01 million, up 3 percent from 2016.

 

The sows farrowed during this quarter represented 49 percent of the breeding herd.

 

Moreover, the average pigs saved per litter was a record high of 10.43 for the December-February period, compared to 10.3 last year. Pigs saved per litter by size of operation ranged from 8 for operations with 1-99 hogs and pigs to 10.5 for operations with more than 5,000.

 

The report said U.S. hog producers intend to have 3.01 million sows farrow during the March-May 2017 quarter, up 1 percent from actual farrowings during the same period in 2016 and 5 percent from 2015. Intended farrowings for June-August, at 3.05 million sows, are down slightly from 2016 but up 1 percent from 2015.

 

The report added the total number of hogs under contract owned by operations with more than 5,000 head, but raised by contractors, accounted for 48 percent of the total U.S. hog inventory – same as the previous year. While hog numbers are still growing, Bost said, “As a trader, it’s hard for me to expect a big increase in pork prices at any time in the future until numbers cut back, but I don’t see that happening.”

 

But Bluntzer forecast pork prices for April at $71, May at $78, June at $82, July at $79, August at $75 and September at $68, with lower prices for the fourth quarter.