Economist: Hog breeding herd expanding to meet demand

Economist: Hog breeding herd expanding to meet demand

Pork producers ready to give consumers what they want: more pork

Pork producers are raising more hogs, giving consumers what they want: more pork and more bacon.

According to a Purdue University Extension economist, the nation's hog producers have expanded the breeding herd by 4% and have already farrowed 3% more sows this past fall. The larger number of young pigs will begin to move pork production in early 2015 above levels from the previous year and could reach 7% higher by the end of 2015. Annual production may average 5% higher.

This major increase comes after a series of years of smaller pork supplies dating back to 2007 when feed prices began to escalate and most recently due to significant baby pig death losses in 2014 due to PEDV.

Pork producers ready to give consumers what they want: more pork

"The breeding herd has grown over the past year by 212,000 animals, mostly in the center of the country," said Chris Hurt. "The Western Corn Belt breeding herd increased by 105,000 head, with numbers increasing by 55,000 in Missouri, 40,000 in Iowa, and 10,000 in Minnesota. The second largest growth region was the Southern Plains as that region recovers from the long-term drought. Both Texas and Oklahoma added 20,000 animals to the breeding herd. The third region of concentrated growth was the Central Plains, with Nebraska adding 15,000 animals and Kansas adding 10,000," he said.

Related: December USDA Hogs and Pigs Inventory up a Tad from Trade Expectations

Hurt said that PED appears to be continuing to cause death losses for the industry and remains one of the ongoing uncertainties for baby pig survival this winter.

"Clearly, PED can still have impacts on final 2015 pork supplies," Hurt said. To identify the effect of PED death losses, the estimated number of pigs per litter from USDA is compared to the expected number of pigs per litter based on recent five-year trends.

That analysis suggests that baby pig death losses were greatest last January to March when losses were about 8% more than trend. During the warm weather months of July, August, and September those losses dropped to about 2%. The most recent information for October and November suggest the death losses are increasing again to 3 to 4%. If so, these are similar to the rates of loss in late 2013.

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Looking forward, even though PED continues to impact baby pig survival, the number of pigs per litter is expected to be higher by 2 to 3% during the first half of 2015.

"Pork production is expected to be up 1% in the first quarter of 2015, but 5% higher in the second quarter," Hurt continued. "That second-quarter increase will come from the 4% larger pig crop last fall and 1% higher marketing weights. Pork production in the last half of 2015 is expected to be 5 to 7% higher, driven by 3 to 4% larger farrowings this winter and spring, by higher weaning rates, and by small increases in market weights. For the year, these factors will provide about 5% more pork," he said.

Related: U.S. Pork Exports to Mexico Breaking Records

Pork consumers had to bear much of the costs of the PED virus, which came at a time when pork supplies were already low due to an earlier period of extremely high feed prices. Retail pork prices reached a peak of $4.22 per pound in Sept. 2014, according to USDA, and have been dropping since, Hurt said. The general trend toward more affordable pork should continue throughout 2015.

"While pork producers suffered through PED death losses in 2014, they were rewarded with record-high hog prices and record profitability partially as a result of PED," Hurt said. "Hog prices averaged near $76 per live hundredweight, with estimated profit above all costs of $53 per head."

According to Hurt, hog prices for 2015 are expected to average about $60 per live hundredweight, a sharp drop from the $76 record of last year. But total costs of production are expected to be about $53, providing a strong $22 profit per head produced. Lower costs are being driven by the lowest feed costs in five years, as corn prices are expected to be at five-year lows and meal prices the lowest in the past four years. Hog prices are expected to average around $60 per live hundredweight in the first quarter of 2015, move to the mid-$60s in the second and third quarters, and finish the year in the low-to-mid $50s.

"The theme for pork producers in 2015 will be to strive to gain control over PED death losses and to continue to expand the breeding herd," Hurt said. "It is likely the breeding herd will continue to expand another 2 to 4% over the course of 2015.

"Producers may express some disappointment that the extraordinary profits of 2014 will not continue, but they also realize that 2014 was the aberration year that may only happen once in a lifetime," Hurt concluded. "Most will be happy to accept 2014 and 2015 as the best two consecutive profit years in modern hog production."

Source: University of Illinois

TAGS: USDA Extension
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