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Ron Plain

After 18 consecutive months of losses, profitability has finally returned to the hog industry. Being a natural pessimist (I am an economist after all) I've begun to wonder how long the profits will last.

Seasonally, the odds favor red ink at the end of the year. Only 9 of the last 20 Novembers were profitable for hog producers. The same is true for market hogs sold during December.

Another big risk factor is the hog cycle. On this score, things look more encouraging. The traditional 4-year hog cycle calls for several more months of decline in marketings, and there is little reason to expect 2003 to be an exception.

According to USDA data, during the first 21 weeks of 2003, U.S. federally inspected sow and boar slaughter was up by 26,845 head (2.03%) compared to the same period in 2002. During the same period, the number of sows and boars imported for slaughter from Canada was down 7,427 head (3.26%) compared to the first 21 weeks of 2002.

Merging these facts implies the number of U.S. sows and boars slaughtered during the first 21 weeks of 2003 was up 34,272 head (2.59%) compared to the same period in 2002.

The U.S. swine breeding herd was down 3.2% on December 1 and down 4.5% on March 1 according to the quarterly USDA hogs and pigs surveys.

So, it looks like the slaughter of U.S. sows and boars, as a percent of the number in inventory, was up by 6.4% during the first 21 weeks of this year.

Our gilt slaughter data shows a higher percent of gilts in the barrow-gilt mix thus far this year than last. More gilts slaughtered means fewer retained for breeding.

Sales of seed stock reported to the National Pork Board under the mandatory checked-off program were down by more than 10% in the first four months of 2003 compared to January-April 2002.

April was the eleventh consecutive month in which the number of sows and gilts bred was below year-earlier levels.

All things considered, the odds strongly favor hog prices being profitable for most of the time between now and the end of 2004. One big risk factor that is hard to predict is feed costs. If it turns hot and dry in the next few weeks, higher cost of production could easily wipeout most of the anticipated profits.