Anticipation is growing for this week's quarterly USDA Hogs and Pigs report. This report may get the most attention of any of the quarterly hogs and pigs reports in several years. With the hog industry having little direction on a weekly or monthly basis when it comes to actual hog numbers and production levels, many traders and general market watchers are trying to fill in some of the gaps that developed through the COVID-19 crisis. Last week, for the first time since packer slowdowns started in mid-April, overall estimated weekly slaughter numbers were projected to be 133,000 head above year-ago levels. This trend of active pork production is expected to continue through the upcoming weeks as packers continue to move hogs through the system as they aggressively run six days a week at many plants.
The expectation from the market was that, due to the significant reduction in slaughter numbers during Aril and May, the industry would be plagued by heavy hogs that would create a burden on the industry for months to come and keep the market from remaining current through most of the year. However, over the last month, hog weights have eroded, with the latest weekly report posting hog weights for the week ended June 13 at 286.6 pounds per hog. This is a 1.1 pound per head reduction from the previous week. Although weights are still two pounds higher than year ago levels, the trend of falling weight over the last five weeks has dispelled the theory that the market is not as current as most have expected. The week of May 2 posted the lowest estimated overall slaughter level with total slaughter at 1.46 million head. Current estimated slaughter last week was 2.59 million hogs moving across the kill floor, creating significant improvement in the last six weeks. Hog weights peaked during the first full week in May with average live weights at 295.1 pounds. In weeks that have followed, aggressive reduction in hog weights have developed, creating more questions that the hog market has not been as current has once feared due to the significant loss in packer production.
The reason weights have not followed the expected surging trend over the last two months has many theories, and the likelihood that a combination of issues has led to the falling live weights is having major factors in keeping weights lower. The most publicized theory has been herd reductions due to euthanization. A portion of the hog herd has been depopulated through the last couple of months, but the overall number of hogs affected is extremely hard to pin down. Even though these numbers will have a significant impact on operations, the total on a national and regional basis is likely smaller than some are proposing.
Most likely, the biggest contributor to reduced hog weights is a proactive strategy taken by hog producers over the last three months. They reduced overall daily gains, likely beginning in mid-March, when social distancing first started and regulations started to be seen around the nation. Significant reductions in hog slaughter did not develop until early April. With producers starting to reduce daily gains from maximum levels with the use of ration changes, marginal temperature changes and slight feed reductions, the potential to curb daily gains by 0.5 pounds per head per day would result in an estimated 15 pounds per month of production. Through the combination of all recent changes, hog weights have fallen 8.5 pounds per head from the highest levels. This will go a long way in helping to keep the market current through the summer.
The upcoming USDA Hogs and Pigs report won't answer all of the questions. However, a close look at current market hog numbers in specific weight categories and expected farrowing intentions through the rest of 2020 and early 2021 should help give a more clear picture of direction through the upcoming summer and fall months.
Rick Kment can be reached at email@example.com
© (c) Copyright 2020 DTN, LLC. All rights reserved.