USDA will publish the results of their June hog inventory survey this coming Thursday. I expect it to show a slightly larger swine herd than at this time last year with the market hog inventory up 2%. This will keep pressure on hog prices in the second half of 2024. I expect the report to show farrowing intentions for the summer and fall to be down a bit over 1%. This creates potential for reduced hog slaughter in the first half of 2025; depending, of course, on what pigs per litter does to the size of the pig crop.
The pigs per litter number is difficult to forecast. Farrowings tend to track with lagged profitability. PPL is impacted by herd health and weather. For the last four quarters, ppl has averaged 4% higher than a year earlier. Over the previous 12 quarters ppl averaged only 0.1% above the year-ago level. I have no good explanation for this dramatic increase.
In the spring of 2023 March-May ppl was a record 11.36 head. That was up 3.27% year-over-year. That record was broken the next quarter when June-August ppl was 11.61 head. A new record of 11.66 ppl was set in the fall. The number of pigs per litter is usually lower in the winter. December-February ppl averaged 11.53 head. I’m going with a forecast of 11.63 pigs per litter for March-May, an increase of 2.4% from last spring and up 0.9% from the previous quarter. This may seem a small increase but my forecast is 5.7% more than two years earlier. That is the biggest two-year increase since March-May 2016 when herds were recovering from the PED virus.
The huge financial losses hog producers suffered in 2023 are the primary reason for the declining breeding herd. Each month economists at Iowa State University estimate costs and income for Iowa hog farms. Their calculation put 2023 losses at $23.10 per hog marketed. Their latest calculations put the profit for hogs marketed in May at $17.06 per head. May was only the fourth profitable month in the last 19 months.
Iowa State’s calculated cost of production for hogs marketed in May was $64.78/cwt (liveweight) or $86.38/cwt (carcass weight). May’s cost of production was lower for the 13th consecutive month. The reason for the decline in cost of production is falling feed costs. Corn prices started 2023 above $7 per bushel and ended the year under $5 per bushel. This year Omaha corn has been averaging close to $4.50 per bushel. Corn futures contracts are trading under $5 per bushel through December 2027.
Sow slaughter has increased this year. Thus far in 2024 sow slaughter is up 3% while barrow and gilt slaughter is up less than 1%. Increased sow slaughter would imply fewer litters farrowed; provided, of course, gilt retention doesn’t increase.
It is likely USDA’s June report will make some small upward revisions to the March hog survey estimates. Hog slaughter during March-May was up 0.33%. The market hog inventory on March 1 implied spring hog slaughter would be up 0.13%. That is an extremely small miss. Since the first of June, hog slaughter has been up 2.3%. The March Hogs and Pigs Report indicated slaughter would be up 1.5%. This is not a big miss but is enough to justify some small revisions. Plain
As it does most years, the peak in 2023 hog prices occurred during the summer. The negotiated base carcass price for market hogs reached $106/cwt during late July 2023. This year hog prices are yet to reach $100/cwt. Last week negotiated hog carcass prices averaged a bit under $90/cwt, roughly the same as a year ago. The futures market is expecting hog prices to trend lower for the rest of the year.
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