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Last week we titled our commentary “Where are the Hogs?” If you read Dennis Smiths of ADM regular market observations, you would have saw the same title “Where are the Hogs?” Both our reports were sent minutes of each other last Monday morning. Back and forth with Dennis we both found it funny we had same title. We both were making the same point USDA September 1 Hogs and Pigs Report had a 5% increase of hogs of over 180 lbs. year over year the reality the last three weeks was marketing’s were even. “Where are the Hogs?”
So, what happened last week (Week 4)? 2,584,000, last year 2,608,000 a decrease year over year of 24,000. A 5% increase would be about 125,000 more. So now 4 weeks with no increase year over year. 5% more would have been 500,000 head more marketed.
Last week USDA estimated live hog weights at slaughter of 285 lbs. the same as a year ago. 4 weeks ago, slaughter weights were 3 lbs. higher year over year. Last 4 weeks no more hogs and weights narrowed. If there were 5% more hogs and not marketed weights should be going up year over year. The opposite has happened.
We expect months and months of devastating loses is coming home to roost, there are no more hogs. USDA’s continual overestimating of future pork supply has been wrong this in itself has hurt producers prices. I.E., if you were a pork buyer for a major retail chain, would you be anxious to aggressively purchase pork when you read 5% increase in supply. No, you wouldn’t, and this in itself depresses pork demand and hog prices. What’s the saying? Scariest words in English language, “I am from the government, and I am here to help.”
- We are in a continental market with USA – Canada hog supply closely linked. Following is the latest year to date data USA – Canada Hog Marketing’s.
Year to date USA – Canada hog marketing combined plus about 500,000 + 0.5%. Not exactly an expansion deluge.
- No change in total pigs sent to USA year to date Canada slaughter down 500,000 head. Fact is Canada pig supply down. USDA in their latest country report estimates Canada will increase production 1% in 2025. We doubt it.
- USDA reported last week on expected 15.2-billion-bushel corn crop with record yields of 183.8 bushels per acre. Soybeans a record crop of 4.586 billion bushels on a record yield of 53.1 bushels per acre. There have been three years the U.S. has ever had over 15 billion bushels of corn. 2 of 3 this year and last. Feed costs are usually 65% of the cost of production in swine. Back-to-back 15 billion crop it’s the reason U.S. is averaging cash corn $3.85 bushel. A long way from $6.00 plus and such it has decreased cost of production more than $20 per head. Record larger soybean crop is also helping swine cost of production last Friday soymeal $316 ton, it was as high as $410 earlier this year. We expect to continue to see reasonable feed prices for next several months.
Summary
U.S. corn and soybean price has dropped swine cost of production. USDA 5% increase of hog inventory appears to be dramatically wrong. Time will tell but we expect strong increase in hog price when the reality of contracted hog supply sinks in.
