Hog Prices Continue to Climb

Jim Long Pork Commentary

Pork Commentary, March 22nd, 2021
Jim Long, President-CEO, Genesus Inc.

Jim Long's Pork Commentary

The U.S. hog price continues to climb

  • Iowa- Southern Minnesota Friday averaged $91.44, the highest price since October 2014
  • Pork Cut-outs closed Friday at $102.99
  • Both June – July lean hog futures closed over $1.00 on Friday. June 100.60. On August 12th June was 74.750. That’s over $50 per head difference. The difference is losing lots of money compared to making money.

God help the poor producers who listened to the Chicken Littles that were encouraging producers to sell hogs last August in the 2021 market. Why? Because these wizards said there was going to be more pigs in 2021 than in 2020.

From January 1 to last week, the U.S. hog slaughter has been -4.4% lower than a year ago (1.330 million fewer). No wonder hog price is higher.

Sow Slaughter continues high, the last two weeks of data both over 66,000 a week. Levels of liquidation in our opinion.

One of the factors re. Sow numbers is sow mortality. Pig Champ is a renowned swine record-keeping system. Last year (2020) the median sow mortality (305 farms) was 13.60%. A record-high number.

Pig Champ Sow Mortality Median

13.60 %12.20 %9.45 %7.55%

As you can see, sow mortality has increased 6.05% over the last ten years. If we use 6 million as U.S. sow inventory that would be an increase of 360,000 dead sows a year. If a sow is worth $500 (salvage-plus weaned pig value), a 2500 sow unit (+6.05% -150 sows) = $75,000 decrease in revenue per year. A huge economic loss for our industry.

We believe the increase is mostly from European genetics designed for small European farms not able to adapt to the U.S. production facilities of scale. Poor legs, poor temperament, poor structure lead to more dead sows. There is an argument made by European based Genetic companies – that sow mortality is a trade-off to having a prolific sow

Let’s look at some Pig Champ Data.

Total Born per litter12.8214.0015.03
Sow Mortality7.55 %9.45 %13.60 %
Piglets weaned/Female/year22.1923.6224.88

As you can see by data Total Born Litter size has jumped 2.2 pigs per litter since 2010. You would expect a large increase in pigs/weaned females/year. There was an increase of 2.79 but it’s for less than you would expect with an increase of 2.2 more born litter size. In the ten years 2.2 times a 2.3 turn. Is 5 pigs more?

In our opinion the huge increase in sow mortality is a big part of weaned per year numbers not increasing significantly. The attrition in the sow herd is real, limiting production and with a big cost from lost revenue for sow salvage and pigs. When you buy genetics it’s wise to study not only litter size, growth, carcass but sow herd attrition.

USDA Hogs and Pigs Report

The U.S.D.A will come out with March 1st Hogs and Pigs report this coming week. The recent history of their accuracy has been marginal.

  • Last September report- market hog levels up to 10% over year over year. The hogs must have all died because they never showed up in slaughter.
  • December 1st report- market hogs year over year 180 lb. plus was 101%, 120-179 lb. 100%.
  • Since January 1st, which is 11 weeks, slaughter 4.4% less year over year.
  • The March 1st report should show continued breeding herd liquidation and 4-5% fewer market hogs. Maybe it will, maybe it won’t.

In the end the price will be driven by what Pork sells for and with Pork-Cut-outs at $102.99 in mid-March, there seems to be an upside as supply plummets seasonally. We expect $1.20 cut-outs, pulling hogs up further than lean hog futures are now. Producers need it. 2020 was as miserable as it gets.

We received the following report today after the Pork Commentary was written.

China- Massive Sow Loss

China Ministry Agriculture Rural Affairs has said the second ASF wave has caused the following:

  • A loss of 9.09 million sows the two months of January- February.
  • China sow inventory has declined from December 2020 41.61 million sows to 32.52 million in February 2021 – a decrease of 28%
  • 15 kg (36 lb.) feeder pigs are now 1800 rmb ($275 U.S.)

Our observations

We had heard before from the MARA report that some in China think the losses in the second ASF wave are greater than the first wave. Losing 9 million sows in 2 months is extraordinary. We expect losses are continuing at a rapid rate. The hog market price might not respond right away as pigs under 200 lbs (90 kg) are sent to slaughter before they die, and this short term puts more pork into market. This might also delay major increase in China Pork imports.

  • We expect that the huge sow herd reduction will lead to large pork imports for more than a year.
  • All the dead sows will not be producing pigs that need feed. This certainly will cut China’s grain-soybean imports.
  • It’s obvious that China does not have ASF under control.
  • We expect if there was a loss of 9 million sows in 2 months, there will be at least another 5 million before it gets slowed down. That’s a decrease of 200 million market hogs. Equal to all of USA- Canada-Mexico production plus (200 million hogs = 2 billion bushels corn needed).

In our minds, how high hogs will go in North America over the next year is almost beyond our comprehension. We expect record prices. Why? Less hogs and More Demand.