The fourth quarter usually presents a seasonal struggle for pork producers, but this year is likely to be even more challenging.
Large hog numbers are already in the pipeline and nothing will change that, says Lee Schulz, Extension livestock marketing economist with Iowa State University. He says the data in the latest USDA Hogs and Pigs report suggests a 1.4% increase in numbers over year-ago figures.
Schulz estimates prices to be in the $53 to $57 per hundredweight range on a lean basis, with break-evens near $60 or slightly higher.
“We are going to continue to see depressed prices,” he says.
Part of the problem is a huge backlog of hogs. Temporary plant shutdowns due to the COVID-19 pandemic forced producers to hold on to pigs longer than planned.
Schulz says from April 11 to Aug. 1, 1.24 million fewer hogs were slaughtered than a year ago. Given a 3.2% decrease in production, he says that represents roughly 939,000 more hogs than a year ago.
“We have a lot of hogs that we have to move through,” Schulz says, adding packing capacity has recovered to nearly pre-pandemic levels.
With surges of COVID-19 reported in many regions of the country, additional plant slowdowns could occur, says Scott Brown, Extension livestock marketing economist at the University of Missouri.
“If we lose capacity, with all the hogs we have out there, it’s going to be a major concern,” he says.
Brown says there are questions when it comes to hog numbers. Some producers were forced to euthanize pigs earlier this summer due to lack of packing capacity.
“This backlog we had is better, but we definitely aren’t rid of it,” he says. “What we need are large Saturday runs and every shackle space filled.”
Trade issues are also a concern. Brown says exports were 630 million pounds higher in the first quarter of 2020 than a year ago. He says that figure could fall to an increase of 180 million pounds in the fourth quarter.
“I’m concerned that trade is slowing, and that we may be seeing a bit of a dip in domestic demand as well,” Brown says.
He expects fourth quarter prices to be about 15% lower than a year ago.
“There is a lot of downside risk in this market,” Brown says. “Right now, you almost have to think about delivering hogs at any price. It’s tough, but it could get tougher.”
Schulz says while the fourth quarter will be challenging, it is important to stay current.
“We’re really taking baby steps at the moment,” he says. “We have seen a rebound in the cattle market that we haven’t seen with hogs. We will continue to see large supplies into 2021, and hopefully we can work through these numbers and see better prices soon.”