Jim Long, President and CEO Genesus Genetics
The relentless decline of the U.S. breeding herd continues. It peaked on December 1st, 2019 at 6.471 million. The breeding herd this March 1 the USDA reports is 6.098 million a decline of 373,000. It’s no wonder the supply of market hogs has declined.
Having less sows has led to fewer market hogs. On March 1st 2020, the USDA reported 71.254 million in inventory, this March 1st, 2022 down to 66.111 million – a decline of 5.143 million hogs. No wonder hog prices are higher and hundreds of thousands of finisher spaces sit empty.
If you are a regular reader of this commentary you know we have continually written that due to high feed costs, labor shortage, disease issues, increased building costs, generational change, old sow barns, etc. we did not see any reason the sow herd is getting bigger. The USDA report which shows a decline from March 1st last year by 117,000, and from December 1st 27,000 confirms our opinion.
Last week prior to the report, one of the Chicken Little Economists predicted the sow herd on March 1st will be 0.2% higher than a year before. They overestimated the breeding sow herd by about 130,000! Enough said.
In our opinion, the breeding herd has little indication of expansion for all the reasons we listed earlier. So, we expect less hogs over the next 12 months compared to the previous.
We expect strong hog prices for the foreseeable future, other factors contributing to this optimism:
- Current U.S. Chicken Price $159.81, a Year Ago $92.36.
Higher chicken price makes pork more competitive.
- U.S. Beef Carcass Cut-out Price $2.67, Pork Cut-out $1.03.
Unfortunately, pork lags behind beef price, but the high beef price makes pork more attractive to the consumer. We all know consumers pay more for beef because it tastes better. Having better-tasting pork could be constructive for pork demand and price.
- More Beef Processed.
The U.S. has processed 27% more beef cattle so far this year to date compared to the five-year average. Drought, high feed costs are cutting the beef herd. Not if but when the U.S. beef supply declines – supportive for pork.
- Avian Flu has hit Turkey, with both chicken broiler, and egg production affected. Less supply of poultry products could push already high poultry prices even higher.
- European Hog Prices Have Jumped Significantly in the Last Few Weeks.
German hog price was 1.20 Euros/kg on February 9th; last week 1.95 Euros/kg. The increase of 0.75 Euros/kg is 38¢ lb. carcass or over $80 per market hog. The price increase has to be attributed to less hogs available due to the massive sow herd liquidation that Germany and Europe have experienced due to the financial losses of close to $50 per head for many months. Higher hog prices in Europe mean not only there is less European Pork to export but the price will be higher for Global Markets – supportive to U.S. Pork.
Last week the U.S. Supreme Court agreed to review the Prop 12 law in California. A law that bans fresh pork, other than from sows in gestation pens with a minimum of 24 sq. feet, to be sold in California. We commend the NPPC for continuing the fight to stop this legislation. Their diligence on this matter is in the best interest of swine producers. It will be interesting if the Supreme Court agrees that one state can dictate the business practices of 49 other states. Where does that end?
Many of you over the years have read about the travels I have made with my son Spencer. Below is an interview Spencer had with Jim Eadie of Swineweb.