Rising Hog Inventories Bode Ill For Cattle

US hog inventories are rising, reaching record proportions as of Sep. 1, according to the USDA’s quarterly Hogs and Pigs report Friday.  As a result, some analysts said after the report that fourth-quarter slaughter capacity will be strained to the limit.

And when slaughter capacity for any food livestock is tested with record supplies, lower prices for market animals result.  And the pressure often is felt in related live-animal markets.

In 1998 to 1999, a hog slaughter facility was closed just as producers were recommended to expand herds in preparation for increased export business.  At the same time, Canadian imports of slaughter hogs rose, further straining capacity.

Hog prices at the time dropped into the teens per cwt, compared with a national average reported by the USDA’s National Agricultural Statistics Service Monday of $37.39.

Since then, US hog slaughter capacity has expanded, but market analysts still say the system will be stretched to its limit.




The latest Hogs and Pigs report listed all hogs and pigs in the US on Sep. 1 at a record 70.851 million head.  This is up 1.666 million, or 2.41%, from the previous record last year of 69.185 million.

The report was interpreted bearishly by traders since the numbers were 1.3 percentage points larger than pre-report estimates.  In fact, all of the USDA-NASS figures were above trade estimates except for the number kept for breeding, which was 0.1 percentage point below.

The number of hogs kept for marketing in Friday’s report was 64.835 million, a record and up 1.635 million, or 2.59%, from the previous record of 63.200 million set last year.  Prior to this, the record high Sep. 1 marketing hog number was 62.135 million.

The breeding herd is still growing, and while it pales in comparison to 1994’s record high of 7.468 million, it is much more efficient at producing and saving pigs.  Friday’s report put Sep. 1 breeding herd numbers at 6.016 million head, up 30,000, or 0.50%, from last year’s 5.986 million.

What is significant about the breeding herd, though, isn’t necessarily the actual number, but that it has grown every year since the latest bottom of 5.788 million in 2012.  And, it is 246,000, or 4.26%, above the actual low of 5.770 million head set in 2010.

Steve Meyer, vice president of pork analysis for Express Markets Analytics, said in an article for the National Hog Farmer that “only once in the last seven quarters has USDA not significantly revised the pig crop upward and the average over that time period has been 2.45%.”

If that 2.45% were added to the reported Sep. 1 pig crop of 30.138 million head, it would mean a more accurate count of 30.876 million head, a number that could strain slaughter capacity for months.




Cash cattle markets Monday were quiet with no bids or offers reported.  Cattle last week were $2 to $3 per cwt lower at $103 to mostly $104 on a live basis and at $162 to mostly $163 dressed.

The USDA’s choice cutout Monday was $0.73 per cwt lower at $186.62, while select was off $0.88 at $176.99.  The choice/select spread widened to $9.63 from $9.48 with 98 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $132.31 per cwt, down $1.64.  This compares with the Oct settlement Monday of $123.97, up $0.82.