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Pork Commentary: USDA December Hogs and Pigs Report

30 December 2010
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

CANADA - In this week's Pork Commentary, Jim Long comments on the 1 December Hogs and Pigs report released by the US Department of Agriculture on 27 December.

There were several analysts (Chicken Little economists) that predicted that the US market inventory would be higher than a year ago in the USDA December report. This type of mindset comes from the usual suspects that continue to ignore the reality of a production base that has been losing money this past quarter. The Chicken Little economists that never owned a pig, never will own a pig, and in all likelihood never signed a personal guarantee. They just don’t seem to get, that an industry that has been losing money never expands. Never have, never will. High corn prices of $6.00 a bushel and a loss of $20 per head does not make more hogs.

The report clearly shows fewer hogs.

USDA 1 December Hogs and Pigs Report
Thousand head
  2009 2010 2010 as per cent of 2009
Kept for Breeding 5,850 5,778 99
Market 59,037 58,547 99
Market Hogs and Pigs by weight group
Under 50 pounds 18,705 18,564 99
50 – 119 pounds 16,782 16,519 98
120 – 179 pounds 12,299 12,208 99
180 pounds and above 11,252 11,256 100

About 500,000 fewer market hogs and 72,000 fewer sows year over year. With high feed prices we see no scenario for expanded swine production in the coming six months. A new price list of over $80 lean must be predictable and expected in 2012 before we will see significant herd expansion. Anything less than 80 cents lean is a waste of money to produce more hogs. A report a week ago by CME funded economists predicted a $1.00 per head profit in 2011. That would get you excited to expand! It’s a big reason there are many empty sow units waiting for buyers. It will take capital and courage to push production higher. $6.00 per bushel corn is not enhancing either the capital or the courage.

Other Observations

  • The Economist magazine this week predicted a 2 per cent growth in global meat consumption in 2011. This is positive for hog prices as demand always pushes prices. The question we ask, where is the 2 per cent greater meat production going to come from to meet this demand?


  • The US pig crop in the USDA report showed June – November was down 1 per cent year over year.


  • December – May farrowings in the USDA hogs and pigs report project 80,000 fewer sows farrowing year over year. 300,000 fewer sows farrowing than two years ago.


  • Litter size continues to increase with pigs per litter the last six months June – November 9.85 up from 9.70 from a year ago. At Genesus we see genetic trends that indicate a gain of .25 pigs per litter per year. We see no end in sight on genetic improvement. With herds weaning over 12.5 per litter the industry upside is immense. At 12.5 we would need 25 per cent fewer sows to produce just as many pigs.


  • It’s a challenging time for our industry as we face environmentalists, high feed prices, animal welfarists, global market access, etc... We are firm believers in conferences and congresses. It’s at these venues that we are able to learn and hear different perspectives. In the coming weeks there are several state events. The largest is the Iowa Pork Congress – 26–27 January. We will be there. You should be too. We don’t learn much sitting at home waiting for the world to show up.

Summary

The USDA has fewer hogs, and fewer sows. The futures indicating 90 cent lean hogs are not too bullish. We have record high beef prices, and the chicken industry has slowed chick replacements. The US and global economics are showing recovery. More income always equals more meat protein consumption. Hog prices will be historically high the bug – a - boo is feed. 2011 will be interesting. Have a Happy New Year – you deserve it!!

Author: Jim Long, President & CEO, Genesus Genetics

To find out more about Genesus Genetics,
please take the time to visit their website at
www.genesus.com.

The opinions expressed in this commentary are entirely those of the author and can not taken to represent the views of ThePigSite.com, its owners or its management.



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