Pork Commentary, December 28th, 2021
Jim Long, President-CEO, Genesus Inc.
The USDA released its December 1st Hogs and Pigs Report last week. No surprise to us there continues to be fewer pigs year over year.
USDA December 1st(x 1000 head) 2019 2020 2021 2021/2020 Kept for breeding 6471 6176(6276) 6180 100% Market 71,757 71,136 68,021 96% Under 50 lbs 22,048 21,989 21,174 96% 50 – 119 lbs 20,638 19,680 19,185 97% 120 – 179 lbs 15,256 15,791 14,809 94% 180 lbs and over 13,816 13,675 12,853 94%
The interesting thing about the USDA numbers is their continual revision in prior quarters down. Example, December 1st 2020 Breeding Herd reported December 2020 at 6.276 million, December 1st 2021 the 2020 December 1 Breeding Herd revised down to 6.176 million – a 100,000 sow decrease. The USDA projected in last year’s December 1st report that December-February 2021 sow farrowing would be 3.118 million – it ended up at 2.929 million, a difference of almost 200,000 sows at 11 pigs per litter over 2 million pigs underestimated. Lots of examples in other categories of USDA overestimating inventory and production. This underestimation has hurt producers in the pocket book by continually holding down pricing.
The USDA seems to be struggling with its inventory counts and projections. We expect this is continuing with the sow inventory and number of pigs that will come to slaughter in the next 6 months; both will be below what the report indicates. The good news is the report is bullish as is with all pig categories below a year ago.
Last summer lean hogs reached $1.20 lb., current summer lean futures mid 90’s. Our premise is that lower hog supply in 2022 compared to 2021 will lead to lean hog prices matching or exceeding 2021. Demand will be there as U.S. domestic economy continues to strengthen. Chicken and Beef prices are strong supporting Pork. Exports will continue at current levels with possible upside.
Compound the reality of fewer hogs in the USA with a major liquidation in China and Europe and we see total global pork production declining in 2022 compared to 2021. This will lead to higher prices in 2022 compared to 2021 in most if not all the world.
Our scenario paints a bright picture for 2022. Unfortunately, the decreased production comes at a cost to many individuals who are leaving the industry due to the financial consequences of pig prices below the cost of production. The Darwinian scenario of our industry continues to lead to further consolidation. It’s not better, it’s just what it is. None of us have the ability to resist the change, either we adapt or die. We have lived it in the Swine Genetic Industry. Ten – twenty years ago there were several more genetic companies than today. One by one they disappeared unable to adapt, compete, technologically or have enough capital. Now not more than a handful of Genetic companies compete Globally. Genesus is one of them and understands the pressure of the need for continual improvement. It’s amazing to see the improvements over the last few years in litter size, growth, meat quality, liveability, and feed utilization. To expect to be a Genetic survivor we need to accelerate our technological advancements. It’s a journey with no end in sight.
So, as we look at 2022, we see a good year. Hog prices will be strong with lower production in over 75% of the world’s pork production sector. The current high feed prices we expect will limit any quick expansion which could sustain higher hog prices for longer than might be normally thought.
We wish all the best for the year 2022.
All our lives journeys continue.