Hog producers are in trouble. Even though China’s pork imports have surged, US producers are out-producing domestic and export markets, presenting a problem for beef producers.
The USDA’s National Agricultural Statistics Service count of all hogs and pigs is record high at 70.851 million head as of Sep. 1, yet prices for all weight categories of swine are well below a year ago and the 1010-2014 average. Without further demand increases, retail prices for pork could go down, increasing competition for consumer spending.
HOG POPULATION RECORD HIGH
The Sep. 1 USDA Hogs and Pigs inventory of 70.851 million head was up 1.666 million, or 2.41%, from last year’s record of 69.185 million.
It looks like producers are in an expansion mode that won’t be broken until bank accounts are depleted.
PRICES DROPPING FASTER THAN NORMAL
As a result of the increased supply of hogs, the national weighted average carcass price for slaughter hogs is declining at a faster clip than normal. Slaughter hog prices usually decline from August through year end because of a normal increase in supply, but the decline this year began in late June and has continued to widen the gap ever since, even dropping below last year’s depressed levels in July.
The national weighted average price for hogs last week was $53.72 per cwt, down $18.95, or 26.1%, from last year’s $72.67 and off $34.02, or 38.8%, from the previous five-year average of $87.74.
And given the physiological propensity of hog populations to increase in the fall, there doesn’t seem to be an outlet for the extra pork except to freeze it or to drop prices and push it through the pipeline.
There may be cold storage room for the extra meat since frozen supplies, at 607.254 million pounds as of Sep. 1, were 46.506 million, or 7.11%, below last year’s 653.760 million. However, stocks were 105.328 million, 21.0%, above the 2010-2014 average of 501.926 million.
It would appear that something has to give.
The LMIC’s annual US retail pork demand index built from data from the Bureau of Labor Statistics and the USDA’s Economic Research Service, stands at 95, using 1990 as 100. This means retail pork demand is a little below what it was in 1990, even though it was the second highest, tied with 1992 and behind 1991’s 97 and 1990’s 100.
ERS and Foreign Agriculture Service data shows 2016 estimated pork exports at 5.058 billion pounds, up from 2015’s 5.009 billion but behind 2014’s 5.092 billion, 2012’s 5.379 billion and 2011’s record of 5.196 billion. Pork exports were projected to rise to 5.260 billion pounds next year and then to 5.430 billion in 2018, which may be too late for some producers.
CASH CATTLE MARKETS QUIET
Cash cattle markets Wednesday remained quiet bids at $98 per and offers at $100 to $102 on a live basis and offers at $156 to $158 dressed.
Wednesday’s Superior Fed Cattle Exchange sold cattle at $97.75 per cwt to $99.75 with most around $98 to $98.50.
Cash markets last week traded lower at $98 per cwt live, down $4 to $5 from the previous week, and at $152 to $156 dressed, down $6.
The USDA’s choice cutout Wednesday was $2.86 per cwt lower at $178.44, while select was off $2.54 at $169.59. The choice/select spread narrowed to $8.85 from $9.17 with 172 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Tuesday was $120.58 per cwt, down $0.11. This compares with Wednesday’s Oct settlement of $119.02, down $3.00.