It appears pork production estimates for the fourth quarter may have been too large.
Last week’s USDA Hogs and Pigs report indicated the market hog supply Sept. 1 was 2.9 percent higher than a year ago. The USDA had projected pork production at 6.3 percent higher than a year ago, and most analysts had expected a 3.5 percent increase in market hogs.
“There was some concern during the summer that we could see 4 percent more slaughter in quarter four, and combined with heavier carcass weights this could push pork production growth near 5 percent,” wrote economist Len Steiner and associates in their Daily Livestock Report. “Based on this report, the number of hogs available for marketing in September, October and early November is expected to be about 3.5 percent higher than a year ago.”
Marketing disruptions from Hurricane Florence likely pushed some hog marketings into October. Slaughter numbers are expected to be large in October.
“Hog weights bear watching,” Steiner and associates said. “For now the pork cutout has performed better than expected, but one needs to be aware that prices do not reflect the supply of hogs on the ground but rather artificially lower slaughter numbers the last three weeks.
“The true test for the pork and hog market will come by mid-October when slaughter numbers surge over 2.6 million head.”
With a large supply of hogs heading to market, they said exports will be vitally important.
“The breeding herd as of Sept. 1 was up 3.5 percent from a year ago and about 10,000 head higher than on June 1,” Steiner and associates said. “In our mind this implies a production increase of around 3 percent for next spring and summer and possibly for much of 2019.
“The outbreak of African Swine Fever has caused next year’s prices to rally as participants try to build a risk premium due to higher pork export demand.”
The USDA’s most recent WASDE report expects pork production to increase by 1.7 percent in 2019.
“Given the virulence of African Swine Fever and the fact that China is a major pork producer/consumer, one would expect very strong global pork prices next year, Steiner and associates said. “But at this point it remains a potential.”