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Hog Numbers are Up & Profits Should Come

The number of hogs being raised in the U.S. has been going up since mid–2014. However, it isn’t necessarily because profits are great.

The last Hogs and Pigs report released by USDA, back in December, was a record-setter at 77 million 338 thousand. That’s three-percent more than year ago. The expansion comes despite unprofitable margins and uncertainties related to trade issues says Jason Franken of Western Illinois University. The fact is there will be more hogs going to market from January to May. One of the reasons, Franken says, is that the litter size has grown on average and is now over 11 piglets per sow, “The continuation of the upward trend in pigs per litter, combined with reported farrowing intentions suggests more hogs going to market in 2020.”

Winter farrowing intentions are up 1 percent from actual farrowings last year and 5% from two years ago. The spring farrowing intentions are also up slightly from last year and up 3 percent from 2 years back.

All of these numbers point to a somewhat higher supply of hogs and pork in 2020 thinks Franken. And, he says, with higher production, one might expect lower prices, but there are additional items to consider on the demand side. For instance, we’re eating more pork per person. Last year’s mark at 52.7 pounds each is the highest number since 1981. Exports are good, too, even to China, “On the world market, all eyes are on Asia, and China in particular, due to their production losses from African Swine Fever. Although held back by China’s retaliatory duties, U.S. pork exports to China increased throughout 2019. In September and October, China surpassed Japan to become our second largest foreign customer after Mexico.”

USDA, by-the-way, is forecasting U.S. pork exports in the first three quarters of 2020 to be 21%, 7.5%, and 8.8% greater than the corresponding quarters from last year. Taking all of this into account, WIU’s Jason Franken says hog prices should be profitable throughout much of 2020, even though they have been below the cost of production in recent weeks, as they often are seasonally at this time of year.

Feeding Wheat Co-Products to Pigs

Research from the University of Illinois is helping to determine the quality of protein in wheat middlings and red dog. Both are co-products of the wheat milling process. Each can be fed to pigs and other livestock.

There is information about the digestibility of crude protein in some wheat co-products produced in Canada and China, says University of Illinois Animal Scientist Hans Stein, but only very limited information about the nutritional value of wheat middlings and red dog produced in the United States.

Stein and U of I researcher Gloria Casas fed wheat middlings from 8 different states and red dog from Iowa to growing pigs. Despite the variety in the wheat middlings sources the concentration of crude protein were generally consistent. However, they did find some variation in the digestibility of the amino acids.

The red dog contained slightly less crude protein than wheat middlings.

Stein says the results of this study provide guidance to producers who hope to incorporate wheat co-products into diets fed to pigs. The paper appears in the June 2017 issue of the Journal of Animal Science. The National Pork Board provided funding for the study.

Pork Industry Favored by Strong Demand

Chris Hurt - This is basically a forecast for a breakeven year with all costs being covered, including labor costs and equity investors receiving a normal rate of return.

by Chris Hurt, Purdue University Extension farmdocDaily article

Hog prices are expected to increase in 2017 even with three percent more pork production. Prices will be supported by stronger demand because of a growing U.S. economy and by a robust eight percent growth in exports as projected by USDA. New packer capacity is also expected to contribute to stronger bids for hogs. Feed costs will be the lowest in a decade and total production costs are expected to be at decade lows.

The recently updated USDA inventory report found that the nation’s breeding herd was one percent larger than the herd of a year-ago. This continues a rebuilding of the herd that began in 2014 as feed prices began to move sharply lower and the industry began to recover from pig losses due to PED. The national breeding herd has increased by four percent since 2014. Notable expansions of the breeding herd in the past three years have occurred in Missouri 25 percent; Ohio 9 percent; Illinois 8 percent; and Indiana, Nebraska, and Oklahoma each up 4 percent. Farrowing intentions are up one percent for this spring and slightly below year previous levels for this coming summer.

Producers indicated to USDA that they had four percent more animals in the market herd, reflecting four percent higher farrowings last fall, a three percent increase in winter farrowings and a one percent increase in the number of pigs per litter. Given these numbers, pork supplies are expected to rise by five percent in April and May and then drop to a four percent increase for June through August. Three percent more pork can be expected for September through November of 2017 with supplies up one percent this coming winter compared to year-previous levels.

Live hog prices averaged about $46 last year with losses estimated at $11 per head. Prices are expected to be $3 to $4 higher this year. Live hog prices averaged about $50 per hundredweight in the first quarter of 2017. Prices for the second and third quarters are expected to average in the very low $50s. Prices will likely be seasonally lower in the fourth quarter and average in the mid-$40s. If so, prices would average near $49 for the year and be slightly under projected total costs of production with $1 of loss per head. This is basically a forecast for a breakeven year with all costs being covered, including labor costs and equity investors receiving a normal rate of return.

Current expectations are for feed prices to remain low in 2017, but with corn prices increasing into 2018. On a calendar year basis, U.S. corn prices received by farmers averaged $6.67 per bushel in 2012 (unweighted by marketings). Those prices fell to $3.48 per bushel in calendar 2016 and are expected to be only a few cents higher in calendar 2017. Current prospects are for corn to be $.20 to $.30 per bushel higher in calendar year 2018 due to sharp reductions in 2017 U.S. acreage.

Soybean meal averaged $478 per ton in 2014 (high-protein, Decatur, Illinois), but is expected to average only $315 per ton in 2017, the lowest calendar year price since 2010. Total feed costs per hundredweight are expected to be the lowest in a decade dating back to 2007.Total costs of production may reach 10-year lows. Estimated total costs of production reached $67 per live hundredweight in 2012 driven by high feed prices. For calendar year 2017 that may drop to $49.50, which is the lowest estimated total costs of production since 2007 and would represent 10-year lows.

What are the potential shadows for the industry this year? The first is that meat and poultry competition will be high. In addition to three percent more pork, beef production is expected to be up four percent and poultry production up two percent. There is simply a lot of competition for the consumers’ food dollars.

Secondly, the optimism for the U.S. economy that has been present in early 2017 could falter. This optimism is related to a stronger job market, low unemployment, and record seeking stock market indexes. The anticipated stimulus package of the new administration has likely been a contributor. Time will tell if Congress can agree on this legislation and move it from anticipation to reality. In addition, the FED is likely to continue a series of interest rate increases to slow growing inflation pressures.

Decade low feed cost is important reason pork producers are expected to almost cover all of their costs this year. Weather in the U.S. and in the Northern Hemisphere will be important in the final determination of yields and feed prices.

The industry needs to keep expansion of the breeding herd to near one percent each year. This one percent increase along with about one percent higher weaning rates means the industry can increase pork production about two percent a year. That is sufficient to cover a one percent growth in domestic population and about one percent annual growth needed to expand exports. Growth of the breeding herd at more than one percent could shift the industry back into losses.

Fewer Hogs and Higher Prices

The last Hogs and Pigs report is good news for pork producers. Todd Gleason reports it showed fewer hogs are being raised in the United States and that, in turn, should boost prices.

Pork producers say they’ll reduce the size of their breeding herds. Or at least that’s what the latest Hogs and Pigs report showed. Purdue Extension Agricultural Economist Chris Hurt says farrowing should begin slow this spring and summer. However, right now, the breeding herd is as big as it was at this same time last year. Still, it’s a pattern of change and reduction says Hurt.

Quote Summary - The herd had been in an expansion phase from the last half of 2014 through 2015. That expansion was largely because of record high profits due to baby pig losses from PED. That expansion phase seemingly has now ended.

This ‘ending’ is a bit uneven geographically. For the 16 states USDA surveys for the March report, the breeding herd is up nine percent in Oklahoma and 10 percent in Texas. Some of the primary Midwestern states reported a decrease in their breeding herds over the past year; Iowa down five percent, Missouri down four percent, and Minnesota down two percent. In Indiana, where corn yields were reduced by summer flooding, the breeding herd was down seven percent. Those are all the current breeding herd numbers. It’s the forward looking projections that provide hope for higher pork prices.

Pork supplies in the first quarter of 2017 will come from the three percent smaller summer farrowings. However, with more pigs per litter and heavier weights, pork production is expected to be only about one percent smaller.

Chris Hurt’s price forecast for market hogs then is in a range of $49 to $54 for all of 2016, about $1 higher than last year. He expects prices to rise to the $55 to $58 range for averages in the second and third quarters, normally the grill-out seasonal highs, and then to finish the year in the mid-to-higher $40s.

More Hogs than Expected

The USDA March Hogs and Pigs report did little to help explain why numbers were high, other than to simply admit that hog inventory counts from previous surveys were too low.



Pork supplies in the first quarter of 2015 were expected to rise one percent. In reality, first quarter pork production was up five percent. This is because they were 4.5 percent more hogs that weighed about a half percent more than their year earlier counterparts. More hogs at heavier weights has pushed prices down says Chris Hurt, and that’s not the end of it.
Quote Summary - There is an even more price depressing force coming to the market as the number of hogs coming to market in the most recent four weeks has remarkably been ten percent higher than year-ago levels. Higher than expected current numbers may mean that the breeding herd expansion is larger than USDA surveys have indicated and/or that PED death losses were smaller than producers reported to USDA.
If there has been an undercount of animals, the possibility remains says Chris Hurt for higher market numbers than anticipated for the rest of the year.

As a result of the higher actual marketings in the first quarter, USDA revised last summer’s pig crop upward by nearly three percent. As always, “the proof is in the pudding” meaning that if actual winter slaughter is higher than accounted for by last summer’s pig crop, last summer’s pig crop has to be revised upward. USDA did this by increasing the estimated number of farrowings. Hurt has been wondering, based on USDA’s numbers, if the breeding herd has been expanded.

While USDA raised the size of last summer’s farrowings, the size of the breeding herd was not increased. This still leaves unanswered the question of whether the breeding herd is actually higher, which would indicate that the breeding herd has expanded more rapidly than indicated by USDA survey numbers. If the breeding herd has expanded more rapidly than future animal numbers may also be higher than indicated by the USDA counts.

More pigs coming to market in the first quarter than expected must have come from a larger breeding herd thinks Hurt. He says current marketing numbers have been averaging ten percent higher. If the marketing herd is larger, then marketing numbers could continue to surprise the market on the high side and hog prices will stay depressed.

Finer Ground Corn More Digestible

Finer Ground Corn More Digestible
Hans Stein, Swine Nutritionist - University of Illinois

An animal nutritionist at the University of Illinois has quantified the importance of particle size in ground feed for hogs.




Grinding corn to finer particle sizes can increase its feed efficiency by up to five percent says Hans Stein.
They don’t gain any more, but they eat less to gain the same. Pigs adjust their energy intake. It means there is more available energy in corn when it is ground finer. The pigs eat less, the feed conversion is improved, and it takes fewer pounds of feed to produce a market weight hog.
Stein is a swine nutritionist at the University of Illinois. He investigated the affect of different particle sizes of ground corn when fed to pigs. The corn was ground to 800, 600, 400, and 300 microns.
We discovered amino acid and phosphorous digestibility does not change with particle size. Pigs are very efficient in digesting those nutrients, but when it came to starch we found a linear increase in digestibility as we reduced the particle size of corn. The highest digestibility was with the lowest particle size of corn.
This is because more starch is digested in the pig’s small intestine, causing more glucose to be absorbed and therefore increasing the amount of available energy.
The energy in the corn grain increased as we reduced particle size. A pig will get more energy out of one pound of corn if it is ground to 300 microns instead of 800 microns.
This is were the savings come in to play. The feed conversion rate improves by about one-point-two percent for every 100 micron reduction in particle size, saving seven pounds of corn to finish a pig.
Or producers wanting to formulate diets to a prescribed amount of energy could reduce fat in the ration. Fat is usually used to add more energy, but corn ground to a smaller particle size could replace it. The pigs should perform the same using corn ground to a smaller particle size.
There are a couple of negatives to the smaller grind. The feed doesn’t flow nearly so well and there is an increased risk of stomach ulcers. The ILLINOIS nutritionist says hog producers should try smaller grinds over time, ratcheting down a hundred microns every couple of months. Rations with higher fiber contents will be most successful at the lower particle sizes.