DES MOINES, Iowa – Total U.S. hog numbers during the last quarter of 2020 showed some surprises, including a decline in the nation’s breeding herd, according to agricultural economists analyzing the Dec. 1 USDA Quarterly Hogs & Pigs Report.

“The biggest surprise for me was an upward revision in the June to August pig crop,” said Bob Brown, an independent market analyst in Edmond, Okla. “They raised that pig crop almost a million head. The revisions surprised all of us – how extensive they were – especially those market hog weight categories in the September report, they were pretty wild.”

Brown joined Dale Durchholz, an independent commodity analyst at Grain Cycles in Bloomington, Ill.; Altin Kalo, senior analyst at Steiner Consulting Group in Boston, Mass.; and Steve Meyer, an economist at Kerns & Associates in Ames, Iowa, in a Dec. 23 teleconference with reporters.

Sponsored by the National Pork Board and Pork Checkoff in Des Moines, the report said as of Dec. 1, 2020, there were 77.5 million hogs and pigs on U.S. farms, down 1 percent from December 2019, and down 1 percent from Sept. 1, 2020. Of the 77.5 million hogs and pigs, 71.2 million were market hogs, while 6.28 million were kept for breeding.

The report said Iowa had the nation’s largest inventory, at 24.8 million head, although it was down 100,000 head from last year. Iowa’s September-November quarterly pig crop was 6.33 million head, equal to the previous quarter, but 9 percent above last year. Minnesota had the second largest inventory at 9.4 million head, and North Carolina was third, with 9 million head.

In Illinois, total inventory of all hogs and pigs Dec. 1 was 5.45 million head, up 1 percent from Sept. 1, 2020, but unchanged from last year. In Indiana, the total number was estimated at 4.45 million head, up 50,000 head from a year ago. Kentucky had 460,000 head, an increase of 25,000 from 2019.

In Michigan, the total number was estimated at 1.3 million head, up 60,000 head from a year ago. In Ohio, the total number was estimated at 2.65 million head, down 100,000 head from a year ago. Tennessee had 260,000 head, an increase of 10,000 from 2019.

The report said U.S. breeding inventory, at 6.28 million head, was down 3 percent from last year, and down 1 percent from the previous quarter.

Kalo said the breeding herd number stood out to him as one of the biggest surprises in the report, adding gilt retention during the last quarter was about 6 percent lower than it was in December 2018.

“By the end of the September to November quarter, the breeding herd was 6.276 million head, 3 percent lower than it was a year ago,” he said. “It is the smallest breeding herd we’ve had since early 2018.”

He added the last time producers saw that kind of decline in the breeding herd was in December 2014.

“To me, it underscores some of the decisions, and some of the issues producers are having to deal with: uncertainty in the domestic market as far as demand is concerned,” he said. “When is demand going to start to kick in? What’s going to happen with export demand? And then you have the uncertainty regarding your feed costs.”

The report said U.S. market hog inventory, at 71.2 million head, was down 1 percent from last year, and down 1 percent from last quarter.

The report said the United States September-November 2020 pig crop, at 35 million head, was down 1 percent from 2019. Sows farrowing during this period totaled 3.16 million head, down 1 percent from 2019.

Moreover, the sows farrowed during the fourth quarter represented 50 percent of the breeding herd. The average pigs saved per litter was 11.05 for the September-November period, compared to 11.09 in 2019, the report said.

U.S. hog producers intend to have 3.12 million sows farrow during the December 2020-February 2021 quarter, up 2 percent from the actual farrowings during the same period one year earlier, and up 1 percent from the same period two years earlier, the report said.

In addition, intended farrowings for March-May 2021, at 3.12 million sows, are down 1 percent from the same period one year earlier, and down slightly from the same period two years earlier.

Durchholz said, “There’s a whole lot of uncertainty we’ll be dealing with as we move into 2021. What’s going to happen with (December-February) farrowings has implications as we look toward the summer and fall.”

He said the difficulties in last year’s slaughter continue to pose challenges for analysts trying to forecast what’s ahead. He added the industry needs to look at several years’ data instead of trying to compare it to 2020 slaughter disruptions.

“How many hogs were potentially euthanized, which we really don’t know, creates a real nightmare from an analyst to utilize their last year’s numbers as a basis,” he said.

Brown said he doesn’t think there have been any backlogs in market-ready hogs, according to his data.

But Kalo said, “My argument all along has been there were some backups. They were probably more so on the packer side than they were on the producer side. If you look at a breakdown of weights by who owns those hogs, weights on packer-owned hogs have been incredibly high through (last) fall.

“Part of it is because they can manage better than producers can,” he said. “They own the packing plant, so they can schedule those hogs when they come in. But in some cases, the weights on those hogs were 4.5 percent to 5 percent higher than a year ago.”

Meyer said the average of producer-sold barrows and gilts last month was 215 pounds, while packer-sold barrows and gilts came in at 222.7 pounds – a difference of 7.7 pounds based on who owns them.

“My thought (early last month) has been anywhere west of North Carolina is pretty well caught up,” he said. “But if you look at how the plants in the Carolinas and Virginia, and that part of the world have been able to run, they have had operational problems all along during the summer that backed up a lot of pigs. It shows up in these packer-raised versus producer-sold barrows and gilts, and I think that’s a pretty good barometer of what’s going on there.”

The analysts also shared their forecast prices for the next several quarters. Durchholz used the CME Live Equivalent Index to quote his prices, and forecast for 2021: First quarter at $45 to $47 per cwt.; second quarter at $51 to $55; third quarter at $46 to $48; and fourth quarter at $44 to $49.

Brown said he used the CME Equivalent Index to forecast: First quarter at $64 per cwt.; second quarter at $81; third quarter at $86; and fourth quarter at $74.

“My forecasts are up about $16 a cwt. from a year ago – $11 of that is because packer margins will be down,” he said. “Packer margins were pushed way out of whack, and that really affected my hog prices. That will be a major story in 2021, in my mind, compared to 2020.”

Kalo said he also used the CME Equivalent Index to forecast: First quarter at $65 to $66 per cwt.; second quarter at $78 to $80; third quarter at $80 to $81; and fourth quarter at $66 to $68.

For the next 12 to 18 months, he said he expects a good export outlook for U.S. pork exports. 

“There’s a lot of money that’s sloshing around,” he said. “When do we start to see some sort of inflationary pressure? A lot of that is going to be a function of when we see demand start to come back in. 

“It’s anybody’s guess as to when things really start to kick in,” he added. “But usually when that happens, you see things ramp up fairly quickly. So at least in our shop, we see the risk more to the upside.”