Consumers Want More Pork And They Want It Now
According to Purdue University Extension economist Chris Hurt, although pork consumers have paid record-high retail prices this year, they want more. The latest USDA Hogs and Pigs report suggests that pork producers will be able to get more pork to consumers and to get it to them more quickly than had been anticipated.
“The rising volume of pork production over the next year will stand on three legs: lower death losses from PED, higher farrowings from producer expansion, and higher market weights this fall and winter,” Hurt said.
How can pork producers produce more pork quickly?
“The PED virus was not as deadly this summer as was anticipated,” Hurt said. “More baby pigs survived this summer than expected, and that will help boost pork supplies by the end of the year and into the winter. The number of pigs per litter this past summer was down 1.6 percent from the previous summer. This is much smaller than the losses in the previous two quarters. The number of pigs per litter was down 5.5 percent in the winter of 2014 and down 5.1 percent in the spring quarter. This meant that the number of market hogs was about 1 percent higher than expected according to the USDA survey results.”
Even more important to the hog and pork price outlook is what will happen to the number of pigs per litter this fall and winter and further into 2015.
“It’s important to keep in mind that PED began to be observed in the national data in October 2013,” Hurt said. “Estimated death losses—measured as the number of pigs per litter below trend—was about 2 to 3 percent in October and November 2013. This rose to 6 to 8 percent in the winter months and then 4 to 6 percent in spring 2014. The critical point is that the number of pigs per litter may actually be above year-previous levels beginning late this fall.”
Hurt said that increasing pigs per litter will be based on the low levels from a year ago and on the perceived “improved management” of the disease this fall and winter.
“It’s clear that PED is not controlled, but the hope is that spread of the disease and the number of death losses can be lowered,” Hurt said. “There are a host of reasons the industry believes they have improved management of PED that include: two vaccines approved for use; better understanding of methods of transmission; and better biosecurity on farms. A milder winter could also contribute. By winter, this improved management could result in increasing pigs per litter by 2 percent to as much as 4 percent over the same measures of a year ago.”
More pigs per litter is one way pork supplies will likely be expanded. Increased sow farrowings is the second way that was revealed by USDA. Producers intend to farrow 4 percent more sows this fall and 4 percent more in the winter.
“It’s easy to understand the incentives producers have to expand, given record profits this summer and high hog prices and low feed prices due to huge fall crop production,” Hurt added.
Breeding herd numbers on Sept. 1 were up 2 percent, or by just over 100,000 head. The biggest portion of this expansion is in two states: Missouri, which was reported to have 40,000 more, and Iowa with 30,000 added head. Other states with noted expansions were: Texas, up 15,000 head, and Colorado, Illinois, Indiana, and Oklahoma with 10,000 additional.
Hurt said that market weights may continue to be somewhat higher this fall and winter. High weights will continue to be driven by low-priced feed and favorable profit margins. “Reduced PED losses will not provide as much excess finishing space,” Hurt said. “Weights may be up about 1 percent this fall and winter and then fall by ½ percent next spring and summer.
“More pork will be coming from more pigs per litter, more farrowings, and by more weight in the near term,” Hurt continued. “Pork supplies this fall will be down about 1 percent with winter supplies rising by 1 percent. The farrowing expansion this fall will increase pork supplies toward a 4 percent increase next spring and 5 percent greater pork supplies by summer,” he said.
Will pork production grow enough to really help corn and soybean meal consumption for the 2014-15 marketing year?
Hurt said that only about 2 percent more pork will be produced in the 2014-15 corn and soybean marketing year. However, nearly 4 percent more pork is expected for the 2015 calendar year.
“The point is that it takes time to build the animal base and that more than half of the marketing year will be over before market hog numbers really begin to rise in the spring of 2015. However, grain farmers can be confident that the feed-usage base will continue to build for the 2015-16 marketing year.
“In 2014, the pork industry is having a record profit year, partially due to reduced pork supplies as a result of the PED virus,” Hurt concluded. “Profits for 2014 are estimated at $60 per head for average cost farrow-to-finish producers. The third quarter, which came to a close at the end of September, had an estimated $81 of record-quarterly profits. Profits are estimated to be near $60 in the last quarter and in the lower $40 per head for the first half of 2015. By mid-2015, expanded pork production will cut into prices and profits drop to an estimated $30 per head in the third quarter of 2015 and to $5 per head in the final quarter. Profits for the calendar year 2015 are currently estimated at $30 per head,” he said.
News Source: Chris Hurt, 765-494-4273. News Writer: Debra Levey Larson, 217-244-2880
