| OU 327 | July21, 1997 |
The mid-year 1997 Hogs and Pigs Report was generally optimistic as the increase in numbers was not as large as expected. Inventories were 2 percent larger than last year and 2 percent less than two years ago; these were below pre-report estimates. However, there was a modest increase of 2.25 million head in total numbers since March 1. Breeding numbers were 1 percent larger than June 1996 and 2 percent below two years ago. The June inventory data are shown in table 1.
Expansion continues to concentrate in the major states while most of the non- major states (other than the "17-States") continue to decline. There are exceptions in these non-major areas where large/contract operations are moving.
Table 1. USDA Hogs and Pigs Inventory; U.S.; June 1997.
'97 Pct. change from
Category 1997 1996 1995 1996 1995
*** U.S. June 1: (-------- mil. head--------)
All Hogs and Pigs 58.150 57.200 59.560 + 2% - 2%
Kept for Breeding 6.950 6.870 7.180 + 1% - 3%
Market 51.200 50.330 52.380 + 2% - 2%
Under 60 Pound 20.605 20.265 21.270 + 2% - 3%
60-119 Pounds 12.890 12.700 13.060 + 1% - 1%
120-179 Pounds 9.930 9.800 9.865 + 1% + 1%
180 Pounds & + 7.775 7.565 8.185 + 3% - 5%
*** 17 States June 1:
All Hogs and Pigs 54.030 52.750 55.045 + 2% - 2%
Kept for Breeding 6.350 6.220 6.515 + 2% - 3%
Market 47.680 46.530 48.530 + 2% - 2%
Under 60 Pound 18.955 18.645 19.600 + 2% - 3%
60-119 Pounds 11.940 11.660 12.010 + 2% - 1%
120-179 Pounds 9.400 9.110 9.185 + 3% + 2%
180 Pounds & + 7.385 7.115 7.735 + 4% - 5%
*** All Other States
All Hogs and Pigs 4.120 4.450 4.515 - 7% - 9%
Kept for Breeding 0.600 0.650 0.665 - 8% -10%
Market 3.520 3.800 3.850 - 7% - 9%
Although recent farrowing intentions have been tracking well, many analysts had projected larger numbers. This was primarily based on recent price strengths and lower feed costs. However, one must keep in mind that this situation has not been present or stable all that long. Grain prices started falling only after mid-year 1996 (while the basis remained strong in the Southeast and other areas for a longer period) and hog prices strengthened only after the March 1997 report. Feed prices jumped again this year for a period, about the same time hog prices increased. Producers have been in a catch up situation, trying to cover earlier extended narrow margins/losses. In addition, environmental regulations are likely impacting the industry as new operations, expansion of existing facilities, or the reopening of old facilities are finding this is now much more difficult or impossible in many states/areas.
June intentions (table 2) may not be consistent. The latest MAR-MAY sows farrowed were expected in March to be even with last year, while the actual sow numbers were consistent. The MAR-MAY pig crop was 2 percent larger as the industry continues to be more efficient. The JUN-AUG intentions moved from 2 percent higher in the MAR Report to 5 percent higher in June. The SEP-NOV first intentions were 6 percent larger. The problem with the JUN-AUG and SEP- NOV intentions is where are these sows coming from (or where were they)? It is hard to determine how current inventories would support this size of growth.
Table 2. USDA U.S. Hogs and Pigs Report Farrowings and Intentions;
1996-97 Reports, 1997 Intentions;
Pig Crop and Pigs Per Litter Mar-May Quarter.
------------------------ Report Month -----------------
Quarter June March December September
DEC-FEB(1996-97) - 2 % + 1 % \2 - 1 % \1
MAR-MAY(1997) 0 % 0 % \2 - 2 % \1
JUN-AUG(1997) + 5 % \2 + 2 % \1
SEP-NOV(1997) + 6 % \1
------------------------------------------------------------------------
PIG CROP
MAR-MAY 25.548 + 2 %
PIGS/LITTER
MAR-MAY 8.65 + 2 %
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\1 First Intentions; \2 Second Intentions
On a state basis, the same growth/reduction patterns generally continue as during recent years. The states of Oklahoma, South Dakota, North Carolina (+ 11 percent), Arkansas, Minnesota, Michigan, and Pennsylvania had five or more percent increases in the breeding herd in the June Report. States such as Georgia and Kentucky keep declining while Missouri changed from increasing to a reduction of 19 percent in breeding numbers.
The cost of feed has been very variable and a primary factor in the profitability of swine production. Producers who forward priced, networked, purchased early and/or locally last year, or produced their own grain have had a different economic situation than those buying on the cash market. There does not appear to be a different pattern for the future.
This was a very modest increase in June Report inventories. Based on intentions, JUN-AUG and SEP-NOV farrowings will be significantly increased. This would be the case with a 5-6 percent increase in number of sows and another 1-2 percent increase in pigs per litter. However, unless the current numbers are above the USDA estimates, it is presently hard to project these types of increases for this period. We could continue to have modest increases in supplies this fall and see price strengths remain through most of 1997.
An important situation may be developing for the Southeast as producers and other swine agribusiness entities (especially in Georgia) are starting to investigate the possibility of adding another slaughter facility. This could be significant to this state.
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