DES MOINES, Iowa – While the first quarterly USDA hog report of 2021 showed March numbers down from pre-report estimates, agricultural economists said this decline could actually signal an opportunity for the industry to recover from a very difficult 2020.

“This is not just a mildly bullish report,” said Joe Kerns, CEO and founder of Partners for Production Agriculture in Ames, who analyzed the March 1 USDA Quarterly Hogs & Pigs Report, released March 25.

“This is the reprieve pork producers have been looking for, for quite some time,” he added. “All of these (inventory) values came in below the range of estimates. If history is any indication, we could see further downward (inventory) revisions. This is very, very bullish.”

Kerns joined James Mintert, professor of agricultural economics at Purdue University; Daniel Bluntzer, partner and analyst at New Frontier Capital Markets; and Steve Meyer, economist at Partners for Production Agriculture.

Sponsored by the National Pork Board and the Pork Checkoff in Des Moines, Iowa, the report said, as of March 1, there were 74.8 million hogs and pigs on U.S. farms, down 2 percent from March 2020, and down 3 percent from last December.

The report said of the 74.8 million hogs and pigs, 68.6 million were market hogs, while 6.21 million were kept for breeding. Between December 2020 and February 2021, 33.3 million pigs were weaned on U.S. farms, down 1 percent from the same time period one year earlier.

From December 2020 through February 2021, U.S. hog and pig producers weaned an average of 10.94 pigs per litter, the report said.

In addition, U.S. hog producers intend to have 3.07 million sows farrow between March and May 2021, and 3.12 million sows farrow between June and August 2021.

“This was a surprise. It really changes the outlook for what slaughter numbers will be,” Mintert said. “It gives a stronger outlook for prices.”

After reviewing quarterly reports going back to December 2019, Bluntzer said the U.S. sow herd has been reduced about 250,000 sows, a reduction “the industry hasn’t seen since 2008-09.”

“It’s very interesting that we didn’t really know how the market was going to react, we didn’t know how production was going to react over the last year of COVID-19,” he said. “And then on top of that, when we start to get recovery, we saw a pretty sharp rise in grain prices.

“In my estimation, it’s one of those 1-out-of-6, 1-out-of-8 type of market reports – kind of a shocker; kind of gets the market thinking in a much larger direction,” he added.

The report said while Iowa remains the nation’s top hog producer, at 23.8 million head, the March 1 inventory was down 2 percent from a year ago. The December-February 2021 quarterly pig crop was 5.99 million head, down 5 percent from the previous quarter, but up 6 percent from last year, with a total of 530,000 sows farrowing during this quarter.

Moreover, Iowa’s average pigs saved per litter was 11.3, unchanged from the previous quarter. As of March 1, Iowa producers planned to farrow 510,000 sows and gilts in the March-May 2021 quarter, and 510,000 head during the June-August 2021 quarter.

The report said Minnesota had the second largest inventory at 9 million head, and North Carolina was third, with 8.5 million head.

In Illinois, hogs and pigs March 1 totaled 5.25 million head, down 4 percent from Dec. 1, 2020, but up 2 percent from last year. Breeding inventory, at 580,000 head, was up 10,000 from the previous quarter, but unchanged from last year. Market hog inventory, at 4.67 million head, was down 4 percent from last quarter, but up 2 percent from last year.

In Indiana, hogs and pigs totaled 4.35 million head, up 350,000 head from a year ago. Breeding hog inventory, at 260,000 head, was up 10,000 from last March. Market hog inventory, at 4.09 million head, was up 9 percent from last year. The average pigs saved per litter for the December-February 2021 quarter was 10.7, compared to 10.6 last year.

In Michigan, hogs and pigs totaled 1.31 million head, up 70,000 head from a year ago. Breeding hog inventory, at 120,000 head, remained unchanged from last March. Market hog inventory, at 1.19 million head, was up 6 percent from last year. The average pigs saved per litter for the December-February 2021 quarter was 10.9, compared to 11.1 last year.

In Ohio, hogs and pigs totaled 2.55 million head, down 100,000 head from a year ago. Breeding hog inventory, at 200,000 head, was unchanged from last March. Market hog inventory, at 2.35 million head, was down 4 percent from last year. The average pigs saved per litter for the December-February 2021 quarter was 10.4, compared to 11.00 last year. (Kentucky and Tennessee hog numbers were not included in the report.)

Mintert said, “One of the positives coming out of this first quarter is the fact that the U.S. is apparently ahead of many other countries with respect to vaccinations, and perhaps a return to more normal behavior on the part of consumers.

“I think there’s a lot of pent-up demand among consumers to get out, a lot of pent-up demand at the restaurant and institutional level, and it’s going to be interesting to see how that plays out,” he said.

Looking ahead to May and June, he added the lower hog numbers in the report actually “(bode) well for the meat industry in general, in terms of seeing that rebound for pork and beef, and to some extent, chicken, as well. I think it’s a very positive outlook on the demand side.”

He said U.S. pork exports to China were roughly double what they were in 2019; however, there’s uncertainty about what that volume might be for the remainder of 2021.

“Given the issues they seem to be having with African swine fever, what does that imply about pork exports?” he asked. “Will we see a rebound in those pork exports? They were a little bit weaker in January, but are we going to see a rebound in that?” 

Using the CME Lean Index, Bluntzer estimated prices in the second quarter of 2021 at $96 per cwt., the third quarter at $91; and the fourth quarter at $76.

Kerns used the National Net All Price Methods, and forecast the second quarter at $101 to $104 per cwt.; the third quarter at $99 to $102; and the fourth quarter at $81 to $84; and the first quarter of 2022 at $79 to $83.

Mintert used the National Weighted Average Base Carcass Price, and forecast the first quarter at $75 per cwt.; the second quarter at $80 to $84; and the third quarter at $80 to $85; and the fourth quarter at $70 to $76.

If realized, he said hog prices could increase 25-27 percent this year, compared to 2020. “It could be a very positive year for pork producers to recapture some of the losses of 2020,” he said. “If you think about these supply numbers, it was a challenge to think about the change coming in.

“Looking at prices, we’re all quoting different indexes, which makes it difficult to compare,” he added. “It might be more useful to think of it in terms of percentage change.”

The analysts said the lower hog inventory numbers not only reflect pullback by farmers due to low returns and higher feed costs, but losses incurred from outbreaks of porcine reproductive and respiratory syndrome.

“I think some of those (losses) are already in the (USDA) numbers,” Bluntzer said. “And I think feed prices could have been the X factor that stopped any more expansion.”

Michael Nepveax, American Farm Bureau Federation economist, said, “Overall, this report is widely considered bullish for producers, and signals an opportunity for the industry in terms of recovering from a very difficult 2020.”