Hog producers were expected to face challenging times this year amid growing production, uncertain world politics and rising costs, said Chris Hurt, agricultural economist at Purdue University, in FarmDocDaily.
A GROWING HERD
The USDA Quarterly Hogs and Pigs report showed the number of pigs weighing less than 180 pounds was 4% larger than a year ago and 2% larger than expected. They will be arriving at processing plants from January to May.
A similar story unfolded for the breeding herd, which was up 1.5% and 1.0% more than expected. Winter farrowing intentions were up 1.4%, and spring farrowing intentions were up 1%.
The number of pigs per litter continued higher in 2016 with new records in each quarter and an annual record of 10.5. The last quarter attained the highest level ever at 10.63.
Given that, the industry will increase 2017 pork output by about 3% to 25.7 billion pounds, Hurt said. Production will rise 2% in the first-half and about 4% in the last half.
PRICES
Hog prices were extremely depressed last quarter, averaging about $37 per cwt, the lowest since 2003. The low came in mid-November, touching the low $30s. Recovery came quickly with prices rising to the lower $40s by the end of the year. 2016 live hog prices averaged about $46.
With 3% higher production, one might expect annual prices to be lower, but there are additional items to consider, he said.
–Retail prices dropped in 2016, but they could decline more, stimulating purchases.
–USDA expects exports to expand by 5%.
–With the addition of new processing capacity, hog buying interest could rise.
Live hog prices are expected to be about $48 per cwt in 2017, $2 higher than 2016. Prices could average $45 in the first quarter, the low $50s in the second and third and $43 in the final quarter.
COSTS
The industry operated at an estimated loss of about $12 a head in 2016 and is expected to have losses that average about $6 in 2017 with production costs holding at around $50 on a live weight basis.
First-quarter losses are expected to be about $13 a head. Modest profits may return in the second and third quarters, with a return to the largest losses of the year in the final quarter.
TRADE
Also of deep interest to the pork industry will be the position of the new administration on trade issues and how that might affect agriculture.
Pork exports to China will bear watching. Last year, they nearly doubled, growing to near 16% of total exports.
A stable breeding herd will enable a 1% to 2% expansion of pork production due to more pigs per litter and higher market weights. A 2% production growth rate probably is close to sustainable with modest US population growth and some increase in exports.
CASH CATTLE TRADE HIGHER
Average auction prices Wednesday were $1.40 per cwt higher at $116.79, versus $115.39 a week earlier. Cash cattle then traded at $116.50 to mostly $118 on a live basis, steady with the upper end of last week’s range. No dressed-basis trades were reported but last week ranged from $188 to $190.
The USDA’s choice cutout Wednesday was up $0.32 per cwt at $203.65 per cwt, while select was up $0.73 at $194.30. The choice/select spread narrowed to $9.35 from $9.76 with 105 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $133.67 per cwt, up $0.52. This compares with Tuesday’s Jan settlement of $128.50, down $1.70.