OU 337 July 16, 1998

 

SWINE OUTLOOK -- MID-YEAR CRISES?

Russell W. Sutton, Extension Ag Economist

The mid-year 1998 Hogs and Pigs Report was "more-of-the-same" pessimism as the increase in numbers spiraled upward even more. After a year of significant quarterly increases, total inventory estimates were 6 percent larger than last year and 8 percent more than two years ago. Market numbers were especially higher in the heavier weight categories. Breeding numbers were 1 percent larger than June 1997 but over 7 million head. Breeding numbers for the 17-States was slightly down while the increase came from All Other States. The June USDA inventory data are reported in table 1.

Table 1. USDA U.S. Hogs and Pigs Report ;June 1998.
Category 1998 1997 1996 1995 '98vs'97 '98vs'96
*** U.S. June 1: - - - - - - - - million head - - - - - - - -
All Hogs And Pigs 61.600 58.150 57.200 59.990 +6% +8%
Kept For Breeding 7.018 6.950 6.870 7.060 +1% +2%
Market 54.582 51.200 50.330 52.930 +7% +8%
Under 60 Pounds 21.270 20.605 20.265 19.556 +3% +5%
60-119 Pounds 13.547 12.890 12.700 13.087 +5% +7%
120-179 Pounds 10.990 9.930 9.800 10.941 +11% +12%
180 Pounds & + 8.775 7.775 7.565 9.346 +13% +16%
*** 17 States June 1:
All Hogs And Pigs 57.040 54.030 52.750 55.440 +6% +8%
Kept For Breeding 6.345 6.350 6.220 6.425 0% +2%
Market 50.695 47.680 46.530 49.015 +6% +9%
Under 60 Pounds 19.655 18.955 18.645 18.100 +4% +5%
60-119 Pounds 12.715 11.940 11.660 12.125 +6% +9%
120-179 Pounds 10.210 9.400 9.110 10.135 +9% +12%
180 Pounds & + 8.115 7.385 7.115 8.655 +10% +14%
*** All Other States
All Hogs And Pigs 4.560 4.120 4.450 4.550 +11% +2%
Kept For Breeding 0.673 0.600 0.650 0.635 +12% +4%
Market 3.887 3.520 3.800 3.915 +10% +2%

Location of expansion somewhat changed in this Report. Although only 17 states were reported, the majority of increases in total numbers were in the following states: OK, +29%; IA, +17%; IN and SD, +11%; OH, +9%; IL, +8%; and, MO, +5%. The Southern region was mostly down to neutral with: GA, -13%; KY, -7%; AR, -6%; and, NC + 1%. Georgia was especially down in pigs under 60 pounds as this category was some 50,000 head below last year; on the other hand, North Carolina was up by 50,00 head for this same category.

Unfortunately, recent farrowing intentions have been tracking well and the hogs did materialize.June intentions (table 2) seem to verify current producer plans for this expansion to continue through most of 1998. Given current prices, one would expect the JUN-AUG and especially the SEP-NOV projections to be overstated. On the other hand, most of the June expansion was in the mid-West where corn is cheaper and packers have been sending price signals that they need more supply of slaughter hogs.

Table 2. USDA U.S. Hogs and Pigs Report Farrowings and Intentions; 1997-98 Reports;

1998-99 Intentions; June 1998; and, Dec-Feb Pig Crop and Pigs Per Litter.

- - - - - - - - - - - - - - - Report Month - - - - - - - - - - - - - - - -
Quarter Year

June
 March

December
 September
DEC-FEB 1997-98 +7% +8% ** 0% *
MAR-MAY 1998 +4% +3% ** -2% *
JUN-AUG 1998 +3% ** +1% *
SEP-NOV 1998 +4% *
PIG CROP (DEC-FEB)................ 26,714 th. head; +5%
PIGS/LITTER (DEC-FEB)................ 8.74 head; +2%

* = first intentions; ** = second intentions

The cost of feed has been very variable but much reduced from earlier in the year. Despite cheaper feed costs, most producers have been facing a negative financial position. The grain market is definitely a weather market and could make significant moves in a very short period of time. Producers with the capability to forward price/contract/buy locally, etc. and take advantage of these prices, should consider these alternatives.

Lean hog futures prices look dismal for the latter part of 1998. These prices have apparently considered the above production increases. Until the industry responds with lower production or there is an increase in usage, there does not appear to be a different pattern for the near-term future.

Once this massive supply of heavier hogs clear the market and if producers respond by curtailing production, there should be some financial relief but this does not appear likely until late 1998 or early 1999.


 

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updated 7/20/98