|By DOUG SCHMITZ
WASHINGTON, D.C. — Despite two and a half years of soaring prices and robust profits, the USDA last Thursday said both market and breeding hog numbers for U.S. pork producers remained virtually unchanged from one year ago.
“It’s probably one of the most sleepy reports of the hog and pig as close to estimates as I’ve seen them in a long, long time,” said Daniel Bluntzer, director of research for Chicago-based Frontier Risk Management.
Bluntzer was one of three panelists who spoke with U.S. farm reporters at a Pork Checkoff-sponsored teleconference after the release of the USDA’s Quarterly Hogs and Pigs Report on Dec. 28.
“It’s very interesting that after some of the best profitability in the production sector that we’ve had in decades, we haven’t had any type of significant expansion,” he said.
In fact, Bluntzer likened the USDA’s latest hog numbers to a “non-event” as far as pig supply issues for 2006.
“In the early 1990s, we would have been expanding at the rate of 5 percent,” Bluntzer said. “Producers seem to be saying, ‘The industry is good. Let’s not work our way out of profits.’ They don’t want to repeat 1998 when shackle space was more of a problem.”
As of Dec. 1, U.S. farms held 61.2 million hogs, down 1 percent from September and up slightly from 2004, the USDA said.
The number of U.S. breeding hogs rose to 6.1 million head, up 1 percent from last quarter and one year ago, and the market hog count climbed to over 55 million, up slightly from last year but down 1 percent from last quarter.
In turn, John Nalivka, president of Sterling Market-ing in Vale, Ore., said pork profits for 2005 are standing at around $40 per head marketed, up from $31 one year ago.
Iowa still led the nation in pork production, with 16.4 million hogs on Dec. 1, up 100,000 from one year ago, the USDA report also said. While North Carolina placed second with 9.8 million hogs, it was down 100,000 from last year.
The September-November pig crop was 4.1 million head, with a total of 455, 000 sows farrowed at an average litter size of nine pigs per sow.
The USDA said U.S. pork producers intend to farrow about 2.9 million sows during the December 2005-February 2006 quarter, up 1 percent from the actual farrowings during the same period in both 2005 and 2004.
During March-May 2006, the report added that producers also plan to farrow about 2.9 million sows, up slightly from 2005 and up 1 percent from 2004.
The USDA said the total number of hogs under contract, owned by operations with over 5,000 head, but raised by contractees, accounted for 39 percent of the total U.S. hog inventory, up from 38 percent from last year.
As a result of this increased hog inventory, James Mintert, Kansas State University extension economist, said the lack of expansion by U.S. pork producers has caused them to think further ahead.
“Nobody is building new barns without knowing where those pigs are going to be killed,” he said. “It’s a reflection of the memory of what an ugly picture we had in 1998.”
According to Nalivka, one issue stalling expansion is urban sprawl as new homes become bigger and more expensive.
“If they get close to confinement animal production, they holler,” he said.
Nalivka said another issue of concern is consumer demand, with domestic demand softening and retail pork demand weakening in the third quarter of 2005 than last year.
Moreover, although the U.S. meat industry benefited from low carbohydrate, high-protein diets in the past several years, Nalivka said this specific interest has also dissipated.
“Prices in 2005 and even going back to 2004 were a little stronger than I would have expected,” he said. “I’ve got things coming back to what I would consider a long-run equilibrium. We need to build consumer demand, develop new products and promote them.”
While foreign demand for U.S. pork rose to 24 percent in 2005, the USDA said that demand may weaken as foreign markets drop their moratoriums on U.S. beef, which had dropped in demand in 2005.
One reason the USDA gave for the drop was when Japan banned U.S. beef - until recently - in 2003 after a Washington state cow tested positive for bovine spongiform encephalopathy, or Mad Cow disease.
Bluntzer forecasted 2006’s lean hog prices would average $64 per 100 pounds, down from the average $68 to $68.50 in 2005.
The USDA surveyed roughly 12,800 U.S. producers to provide data for these estimates. Survey procedures ensured that all hog and pig producers, regardless of size, had a chance to be included in the survey, with large producers sampled more heavily than small operations.
During the first half of December, data were collected from about 10,400 operations, which accounted for 81 percent of the total sample, the USDA said.
Published in the January 4, 2006 issue of Farm World.