DES MOINES, Iowa — Last month’s hog numbers hit nearly 78 million head, which was up 4 percent from last quarter, according to the March 1 USDA Quarterly Hogs & Pigs Report.

“If you look at demand so far, cash prices of major products – hams and pork loins – seem to have held up fairly well through last week (March 15-21),” said James Mintert, director of Purdue University’s Center for Commercial Agriculture. 

“Of course, pork bellies are heavily used in the hotel restaurant institutional (HRI) trade, and I suspect we’re seeing that being reflected in the weakness from those belly prices as you go forward,” he added. 

Mintert joined Daniel Bluntzer, president of New Frontier Capital Markets in Robstown, Texas, and John Nalivka, president of Sterling Marketing in Vale, Ore., to analyze the report in a March 26 teleconference with reporters. 

Sponsored by the NPB and the Pork Checkoff in Des Moines, the report said, as of March 1, there were 77.6 million hogs and pigs on U.S. farms, up 4 percent from March 2019, but down 1 percent from Dec. 1, 2019.

The U.S. breeding inventory, at 6.38 million head, was up slightly from last year, but down 1 percent from the previous quarter, the report said. The U.S. market hog inventory, at 71.3 million head, was up 4 percent from last year, but down 1 percent from last quarter.  

The report said the December 2019-February 2020 pig crop, at 34.7 million head, was up 5 percent from last year. Sows farrowing during this period totaled 3.16 million head, up 2 percent from previous year. 

Moreover, sows farrowed during this quarter represented 49 percent of the breeding herd, with the average pigs saved per litter at a record high of 11 for the December 2019-February 2020 period, compared to 10.7 last year.  

“You have to go all the way back to the 1998-1999 debacle in hogs to find a decline that large in the breeding herd,” Bluntzer said. “To me, it really throws up a red flag because we are not going through what we went through in 1998-1999.”

He said he expects total slaughter in the U.S. to be up 3.6 percent above last March, at 133.8 million head, with total production numbers up 3.4 percent.

The report said United States hog producers intend to have 3.12 million sows farrow during the March-May 2020 quarter, down slightly from the actual farrowings during the same period one year earlier, but up 2 percent from the same period two years earlier. 

The report added intended farrowings for June-August 2020, at 3.13 million sows, are down 4 percent from the same period one year earlier, and down 1 percent from the same period two years earlier.  

The total number of hogs under contract owned by operations with over 5,000 head, but raised by contractees, accounted for 49 percent of the total United States hog inventory, up 2 percent from the previous year.  

The report said Iowa hog producers had the largest total inventory among the states, at 24.6 million head, up 4 percent from the previous year. Minnesota had the second largest inventory at 9.3 million head, and North Carolina was third with 9.2 million head. 

In Illinois, total inventory of all hogs and pigs March 1 was 5.40 million head, down 1 percent from Dec. 1, 2019 but up 3 percent from last year. In Indiana, total hog and pig inventory was estimated at 4.15 million head, down 50,000 head from a year ago. 

Michigan’s total hog and pig inventory was estimated at 1.25 million head, up 20,000 head from a year ago. Ohio’s total hog and pig inventory was estimated at 2.8 million head, up 150,000 head from a year ago. (Kentucky and Tennessee weren’t included in the report.)  

Regarding profit margins, Nalivka said meatpackers will continue to do well, ending the year making roughly $38 per head versus $22 in 2019, but that will depend on exports also doing well. 

“I am quite optimistic once we get things going, particularly with our new trade agreements, that the export side will pull us along from the standpoint of the cut-out,” he said. “From a producer standpoint, it’s not been nearly as bright, but I don’t think that comes as any surprise.”

He said producers should be close to breaking even by the end of the year, with late spring and summer possibly looking for a positive margin.

With new packing plant capacity coming online, he estimates 133.2 million hogs annually, resulting in more than 2.6 million hogs marketed weekly. 

“That makes our utilization rate pretty high – bumping right around 98 percent,” he said. “When you get that utilization rate up to that point, it definitely helps that packer-processor margin.”

Using the carcass net weight, Mintert predicts $59 to $60 per cwt. for first quarter; upper $60s for the second and third quarter; and mid-$50s for the fourth quarter. 

Using the CME Lean Hog Index, Bluntzer predicts $59 per cwt. for first quarter, $68 to $70 for second quarter; $66 for the third quarter; and $59 for the fourth quarter. Using the Western Corn Belt weighted average, Nalivka predicts $51 per cwt in the first quarter; $68 to $70 in the second quarter; $63 to $65 in the third quarter; and $48 to $50 in the fourth quarter.

Nalivka said strong expectations for export growth to China remains up in the air regarding how rapidly it recovers from COVID-19 – and how rapidly the U.S. gets larger shipments to China.

“We’ve got a lot of hogs, and we’re producing a record amount of beef and pork,” he said. “And it will take this export market to put any support into this market, once we get on the other side of coronavirus, and start to get into some normal seasonal patterns on both demand and supply.”

He said once COVID-19 is over, U.S. pork will be moving again in the HRI sector. 

“I feel pretty confident that will happen, because Americans are mobile, and people go out to dinner,” he said. “There are a lot of people probably sitting in their house right now that maybe never cooked a meal at home to some extent, and they’ll be anxious, and they’ll want to get back out and go to the restaurant, and go eat dinner. 

“It’s just a matter of getting things moving again, but the bottom line is we’ve got a lot of red meat and poultry in this country that’s going to need to find a home somewhere for demand.”