DES MOINES, Iowa — The USDA’s latest hog numbers are showing increased expansion of U.S. herds well into 2016, according to experts who analyzed the Quarterly Hogs & Pigs report released Sept. 25.
"It’s a pretty decent increase," Altin Kalo, market analyst for Steiner Consulting Group of Merimack, N.H., said in a teleconference, sponsored by the National Pork Board and the pork checkoff. "It shows up in the size of the breeding herd.
"The implication is for steady growth as we go into next year, which should translate into farrowings that are steady to slightly higher, especially as we go into the second quarter of 2016."
Kalo joined Chris Hurt, Purdue University professor of agricultural economics, and Victor Aideyan, senior analyst for HisGrain Commodities in London, Ontario.
The third-quarter report stated U.S. inventory of all hogs and pigs on Sept. 1 was 68.4 million head, up 4 percent from Sept. 1, 2014, and 2 percent from June 1, 2015, which is the highest inventory of all hogs and pigs since quarterly estimates began in 1988.
"I tend to view the current expansion as a disciplined expansion because I’ve seen how the industry historically has responded to higher profitability," Hurt explained. "And we’ve had a big profitability jump, but a disciplined expansion.
"What we see as we go forward is an industry that has expanded about as much as it can without getting into losses. This is a rare event for an economist when supply and demand are reasonably in equilibrium at a price level that allows all costs to be covered."
He said the productivity gains regarding record pigs per litter were "really a victory over PEDv, in a very strong recovery" from 2014’s porcine epidemic diarrhea virus outbreak.
Aideyan said, "The numbers highlight the fact the U.S. hog industry has continued to increase its productivity and has to a large degree – it seems so far at least – overcome the PEDv effects that we had last year. That’s good for the industry to put behind what was a very difficult health issue last year."
The report also said the U.S. breeding inventory, at 5.99 million head, was up 1 percent both from last year and from the previous quarter. Moreover, the market hog inventory, at 62.4 million head, was up 4 percent from last year, and up 2 percent from last quarter.
The report said the June-August 2015 pig crop, at 30.6 million head, was up 1 percent from 2014, with sows farrowing during this period totaling 2.94 million head, down 2 percent. Sows farrowed during this quarter represented 50 percent of the breeding herd, with the average pigs saved per litter at a record high 10.39 for the June-August period, compared to 10.16 last year.
The report also said pigs saved per litter by size of operation ranged from 8 for operations with 1-99 hogs and pigs to 10.4 for operations with more than 5,000.
U.S. hog producers intend to have 2.92 million sows farrow during the September-November 2015 quarter, down 2 percent from actual farrowings during the same period in 2014 but up 5 percent from 2013. Intended farrowings for December-February 2016, at 2.87 million, are down 1 percent from 2015 but up 4 percent from 2014.
Total number of hogs under contract owned by operations with more than 5,000 head, but raised by contractors, accounted for 47 percent of the total U.S. hog inventory, up from 46 percent last year.
Based on the national lean base price, Hurt forecast market prices would hit $63 in fourth-quarter 2015, followed by $64 (first quarter), $73 (second) and $71 (third) in 2016. Aideyan said prices would reach $61, $65, $66 and $68 for the same four quarters, respectively.
Regarding exports, he said, "With the structure of our markets these days, we are exposed to export markets and the impact of any kind of trading on that side. Going into the fourth quarter, we tend to have losses. Historically, it’s the largest exposure to losses. We have had a rally in the last six weeks or so, and it still gives us an opportunity to do some hedging.
"Producers still should consider partial hedges, if they have not done so already going into the last quarter of this year," he added.
For profitability potential in 2016, Kalo said "as long as producers stay disciplined and continue to grow within their capabilities and do not try to overreach, there is an opportunity there to respond to market demands for pork and produce pork at levels that still generate a profit."
As the nation’s top pork-producing state, Iowa had 21.2 million hogs and pigs, the second highest inventory since records began in 1870, behind only December 2014’s inventory of 21.3 million. Illinois’ inventory was 4.75 million head, up 3 percent from June 1 and 2 percent from last year.
On Indiana farms, the total inventory was estimated at 3.75 million head, up 150,000 head from a year ago. Michigan’s total inventory was estimated at 1.1 million head, up 70,000.
Ohio’s total inventory was estimated at 2.4 million head, up 320,000 from a year ago.
