Higher-than-expected inventories and historically large pig crops provided some surprises in the U.S. Department of Agriculture’s (USDA) latest Hogs and Pigs Report.
“The productivity train keeps running down the track,” says Bob Brown, an independent meat market consultant in Edmond, Okla., who participated in the Pork Checkoff’s conference call for news media following the release of the December Hogs and Pigs Report.
The September-November 2012 pig crop, at 29.4 million head, was up slightly from 2011. Sows farrowing during this period totaled 2.90 million head, down 1 percent from 2011. The average pigs saved per litter was a record high 10.15 for the September-November period, compared to 10.02 last year. “The pig crops remain very large historically,” Brown notes.
The breeding inventory, at 5.82 million head, was up slightly from last year, and up slightly from the previous quarter. The U.S. inventory of all hogs and pigs on December 1, 2012, totaled 66.3 million head, down slightly from December 1, 2011.
“There is a considerably larger pork supply than what the board has priced in, and I see no reduction at all in the second, third, and fourth quarters of 2013,” says Kevin Bost, president of Procurement Strategies, Inc. in Des Plaines, Ill.
Producers actively manage risk
According to USDA’s numbers, U.S. hog producers intend to have 2.86 million sows farrow during the December 2012 to February 2013 quarter, up slightly from the actual farrowings during the same period in 2012, and up 1 percent from 2011.
Intended farrowings for March-May 2013, at 2.93 million sows, are down 2 percent from 2012, but up slightly from 2011.
Analysts have some theories about why pork producers haven’t cut back, even when facing record-high feed costs.
“Producers came into the summer and fall of 2012 with more financial staying power than we expected,” says Steve Meyer, owner of Paragon Economics in central Iowa. “They have been actively managing risk on the board.”
Still, huge amounts of risk are being taken in the pork industry, Meyer says. “Everything is on the line going into 2013. Pork producers are betting on strong exports and adequate moisture during the spring and 2013 growing season.”
Industry benefits from record-large exports
U.S. pork exports remain strong, Bost adds. The latest U.S. Meat Export Federation figures show that the combined total of U.S. pork muscle cut and pork variety meat exports was record-large in both volume (218,312 metric tons) and value ($607.3 million).
“I would be shocked if pork demand at the wholesale level isn’t higher in 2013 than in 2012,” Bost says.