Jim Long, President-CEO, Genesus Inc.
U.S. Hog Slaughter Numbers
Down Almost 6%
The USDA reported 6% less pigs in U.S. inventory under 120 lbs. on September 1st count. Those are the pigs that are going to market now 100 days later. Last week the U.S. marketed 2,601,000 hogs; a year ago 2,755,000; down 5.6%. Seems USDA report of significantly fewer hogs is accurate. Week upon week of around 6% fewer hogs will be supportive to hog market as total pork tonnage decreases into a strong domestic market and record exports to Mexico.
The U.S. sow herd declined around 300,000 sows in the Covid debacle of 2020. Now there are less hogs and it doesn’t take an ag economist to calculate the reason. Less sows, less pigs.
In our opinion, there is little activity to grow the current sow herd. If anything, it’s some existing sow units that are empty and now being restarted. There is very minimal new sow barn construction. We don’t believe there has ever been much sow herd expansion during what would be termed high feed prices such as we have now. All of this compounded by the added fact, at current feed prices and current hog prices many are losing money, trading dollars at best.
Lean Hog Futures
The Chicago Lean Hog Futures Casino was in full evidence the past week. I.E. June Lean Hog Futures December 2nd $97.050, December 8th $92.950, December 10th $97.175. Up and down like a toilet seat. Not sure what made all the gyration other than money in and money out. Our thoughts, less hogs are here and will be in 2022. If we had $1.20 in 2021, not really hard for us to believe that we’ll be reached or surpassed in 2022 with even fewer hogs.
2022 – Sow Liquidation Convergent
We are staying with our premise that the three largest production areas in the world: North America, China, and the European Union with over 75% of the world’s pigs will be down in production in 2022.
There is liquidation in China. Latest official report from China was sow herd reduction of 1.2 million sows in the month of October. That’s Canada’s sow herd gone in 30 days. China’s hog prices have rebounded nicely from early October lows (11.5 RMB to 18.2 RMB kg). A jump of over $100 per head reflecting already lower hog numbers. China will be down 15-20% in pork production in 2022 vs 2021. Equivalent to over 100 million fewer market hogs.
European Union liquidation continues and official count December to June was near 250,000 fewer sows. Since June liquidation has accelerated as market prices went down and feed prices went up.
All in all, if correct this convergence of lower numbers could push hog prices to record highs.
This post was written by Genesus