OU 354

July 12, 2000

MID-YEAR SWINE SITUATION
R. W. Sutton, Extension Agricultural Economist
J.E. Albrecht, Extension Animal Scientist

Summary: The swine industry short-term outlook is fairly optimistic. The June USDA Hogs and Pigs Report inventory levels declined from last year and this was the fifth consecutive quarterly decline in numbers. Since early 2000, hog prices have generally been tending above break-even and feed prices have been relatively cheap; this has allowed producers the opportunity to re-capture some of the earlier 1998-99 massive losses. Demand for pork products and consumer conditions have had a major positive impact.

Mid-Year USDA Report: The mid-year 2000 Hogs and Pigs Report of 59.4 million head was two percent below June 1999. From table 1, the number of market hogs was two percent less than last year and four percent below 1998; the breeding herd was four percent lower than 1999 and 10 percent under two years earlier Caution should be applied to considering only the number of breeding head, since the efficiency of this industry is increasing rapidly. One measure is the continued rapid increase in average pigs per litter in table 2. Since the 1980's hog productivity has been among the fastest growing of all agricultural commodities as the national industry average is now approaching nine pigs per litter.

Table 1. USDA U.S. Hogs and Pigs Report; June 2000.

The June farrowing intentions (table 2) presents a continued reduction in immediate future breeding numbers as the JUN-AUG second intentions were two percent less than the same 1999 period; this is compared to the reported three percent reduction in March for this same period. However, the SEP-NOV first intentions projects an increase in sow farrowing numbers. It looks as if the industry is gearing-up to start expansion during this next year. Given this and the current/expected fall feed prices, one would expect these future projections to be under-estimated.

Table 2. USDA U.S. Hogs and Pigs Report Farrowings and Intentions; 1999-2000 Reports;
2000 Intentions; June 2000; and, Dec-Feb Pig Crop and Pigs Per Litter.

* = first intentions; ** = second intentions

General: Primarily because of the combination of declining production and increasing demand, the industry has enjoyed an economic turn-around this year. There are several reasons for this strong demand for pork. Specific pork cuts such as bacon have been very popular. It seems that the belly market has increased because of factors such as fast food sandwiches including bacon, micro-wave products, and a shrinking supply due to changes in the make-up of the lean/ultra-lean hogs. A reduced beef supply and high beef prices has also contributed to this situation. In addition, exports of pork were up during the early part of this year.

Projections: Summer 2000 slaughter numbers should remain 1-2 percent below last year as the DEC-FEB pig crop will be coming to market. Our fall supply will generally pull from the MAR-MAY pig crop (table 2) and this will also be below last year. However, this will be cushioned somewhat because of the increased average weight of market hogs. Producers (companies) normally respond to low feed prices and high hog prices by heavier average weights.

Given the optimistic demand, reductions in slaughter, and lower feed prices, we have recently been profitable. The current question seems to be how long will this last? Table 3, a comparison of quarterly changes in total numbers, demonstrates how the variability in numbers has changed over the last 3.5 years. Since March of 1999, numbers have declined but this rate has slowed during the most recent quarterly report.

Table 3. Percent Change in Quarterly USDA Hogs and Pigs Reports Total Hog Numbers; 1996 - June 2000.

Based on these projected slaughter levels and demand remaining strong (which seems probable as long as the economy grows) we could see fall-late year 2000 prices remain in the low to mid-$40 per cwt range. Early 2001 slaughter will come from the JUN-AUG pigs and, although dropping, could be slightly less to even with the previous year levels. Keep in mind that productivity is expanding at least one percent per year. Past this period (if not slightly before) it seems likely that we will start expanding.

Producers need to prepare for this next round of expansion as there could be a significant shortage of shackle space. Producers may consider tying production to some form of marketing agreement. The Nations slaughter capacity is not increasing, and has in fact been reduced in the Southeast (depending on the base period.) Premium Standard Farms of Kansas City, Mo. signed an agreement to purchase Lundy Packing Co. of Clinton North Carolina. This 8,000-head-per-day slaughtering and processing facility has had a very active role in processing South Carolina's hogs over the last thirty years. It remains to be seen what impact on market availability this ownership change will make. If a few of the large producers in this region expand and everyone else has only moderate expansion then regional slaughter pressure could be sizable.

THE CLEMSON UNIVERSITY COOPERATIVE EXTENSION SERVICE OFFERS ITS PROGRAMS TO PEOPLE OF ALL AGES, REGARDLESS OF RACE, COLOR, SEX, RELIGION, NATIONAL ORIGIN, OR HANDICAP AND IS AN EQUAL OPPORTUNITY EMPLOYER.
COOPERATIVE EXTENSION WORK IN AGRICULTURE AND HOME ECONOMICS--STATE OF SOUTH CAROLINA, CLEMSON UNIVERSITY, U.S. DEPARTMENT OF AGRICULTURE, AND SOUTH CAROLINA COUNTIES COOPERATING.

Outlook Update Index   Ag Econ Home

updated 8/16/00