Analysts labeled last week’s USDA Hogs and Pigs report with adjectives ranging from shocking to a game changer.
Most pre-report estimates suggested a bump in overall numbers, but the report showed a 2% decrease in the inventory from March 1, 2020.
“This really was a shocking report,” says Dan Bluntzer with NFC Markets. “We had a sow reduction of 250,000. We haven’t seen that since 2008 and 2009.”
The total inventory was 74.8 million head, according to USDA. The breeding herd was down 3% from a year ago at 6.21 million head.
The market hog inventory was down 2% from a year ago at 68.6 million head.
The December-February pig crop was down 1% from a year ago. Farrowing intentions from March-May are expected to be down 3%, while June-August farrowings will be down 4% from a year ago.
“This is going to change the slaughter outlook, and it will be closer to what we had in 2019,” says Jim Mintert, an economist with Purdue University.
He says demand for pork is strong and should continue to strengthen as more consumers are vaccinated for COVID-19. That should trigger a bounce in pork demand from the food service industry, Mintert says.
While these numbers would suggest a significant hike in market prices, Bluntzer says the market could have already figured this data into its price outlook.
“How much are these prices predicated on refilling the domestic pipeline of pork?” he says. “My caution in the back of my head is not to read too much into these at face value.”
Rising feed costs likely played a role in the drop in hog numbers.
Joe Kerns, with Partners for Production Agriculture, says grain availability is a concern, adding he is worried about soybean meal availability this summer due to increased domestic and export demand.
Kerns says cold storage numbers for pork are down 25%, adding stocks of poultry are also low. He says this points to strong overall meat demand, and he expects that demand to continue.