Need a Product or service?

Ron Plain

After 18 consecutive months of red ink, the typical U.S. hog producer finally made a little bit of money in May, roughly $5 per head sold.

The number of litters farrowed during April was down 4.0%. This is slightly smaller than the spring farrrowing intentions in the March quarterly report (down 3.4%). Pigs per litter during April (8.88) were up 0.3% from a year ago. USDA estimates the April 2003 pig crop was 3.7% smaller than April 2002. This was the eighth month in a row in which the pig crop was below year-earlier levels.

The December and January pig crops (both 99.4% of a year ago) imply that June and July hog slaughter will be close to that of 12 months earlier, assuming continuing increases in female slaughter and imports of hogs and pigs from Canada. Terminal market barrows and gilts averaged $35.74/cwt last June 2002 and $37.84/cwt in July 2002. I've been skeptical for some time that the winter pig crop was a large as USDA reported. I expect June-July 2003 hog slaughter to be down 2-3% and live prices to average in the low to mid $40s this summer.

The February-April pig crop (96.4%) suggests August-October hog slaughter will be down 3% or so compared to the same three months in 2002. This should mean live hog prices in the high $30s and low $40s. We believe producers accelerated marketings last summer making the third quarter 2002 hog slaughter unusually large and prices surprisingly low. We averaged only $28.10/cwt for terminal market hogs in August-October 2002. There is a good chance third quarter slaughter this year will be down more than 3% and was live hog prices in the late summer of 2003 will average not too much below $40.

USDA had some worrisome news for those hog producers who are hoping that profits will last long enough to recoup what they lost in the last year and a half. The May pig report said the inventory of sows and gilts held for breeding was 3.1% smaller than last May 1 and that producers bred 2.0% fewer sows and gilts during April 2003 than a year earlier.

Although being down is obviously the desired direction to bring about reduced hog slaughter and higher prices, the percentage drop was not as much as hoped. The sow and gilt inventory was down 3.5%, 4.0% and 3.1%, respectively, on February 1, March 1 and April 1. The number of sows and gilts bred has been below year-earlier levels for the last eleven months, but the April drop was the smallest since August 2002. The smaller-than-expected reductions in the breeding herd and females bred may indicate a not-too-distant end to the herd reduction.