Making sense of accuracy of hogs report numbers
Take action! Doing nothing can be the correct action but it must be the result of a decision, not the fallout from inaction or indecisiveness.
Steve Meyer, National Hog Farmer
Oct 12, 2020
The September Hogs and Pigs report, which shocked us with very large numbers of heavy pigs and some state inventories that defied "talk on the streets" was, in fact, lacking a bit in accuracy. Yes, that's a kind way of saying it was wrong, but we need to still be a bit careful with that conclusion. Let's recap the recent developments and what they may mean for the future.
Figure 1 shows weekly slaughter and includes the slaughter levels that the Hogs and Pigs Report implied assuming normal growth rates and sufficient slaughter capacity. The chart is informative on several counts.
1. Weekly slaughter
runs have been far short of the USDA-implied levels. If USDA's 180-plus
inventory had been correct, 1.385 million of those pigs would be backed up on
farms at this point. And a good number of those pigs were already backed up as
of Sept. 1 when the inventory count was taken. Market conditions in the Corn
Belt do not support that kind of backup — and maybe doesn't hint of any back up
2. Packer operating
rates increased last week. The question is "Can this last?" given
tight labor and the potential for coronavirus recurrences. The weekly federally
inspected slaughter total of 2.73 million is well above our calculated 5.4 days
per week capacity of 2.633 million. The way you do that is process 289,000 on
Saturday. That number is the largest non-holiday-influenced figure since
291,993 were harvested the week of June 20. Moreover, today's estimated run of
490,000 head is the largest since March 31 just before plants began falling to
coronavirus difficulties. This week's expected total is 2.65 million or so,
supporting my contention that we can handle 2.7 million a week in a few weeks
but not in every week.
3. If we can make it past Thanksgiving without the Hogs and Pigs numbers coming back to haunt us, things will likely get better. That time period, of course, corresponds to the two heavy inventory classes that were +9.8% and +6.1% from one year ago. The next two categories were down 3.5% year-on-year, pointing to significantly lower weekly supplies late this year.
What are the odds of these positive supply data continuing? I think they are high, but I wouldn't pencil in smooth sailing just yet. The reason is weights and what they tell us in two different parts of the country.
First, the average weight or packer-produced pigs (i.e. both packer-sold and packer-owned) was a whopping 219.9 pounds last week, up another 0.5 pounds from the prior week and eight pounds heavier than last year. The 0.5-pound increase was good news, but the weight of these hogs has gone up by 6.5 pounds in five weeks.
Smithfield, of course, has the largest share of packer-produced pigs and where are the large majority of those? North Carolina. The USDA report indicates that supplies there were not nearly as large relative to last year as they were in Minnesota and Iowa, but our North Carolina contacts indicate there are still many, many hogs backed up there, perhaps as many as a million head. There is some new hope as the Tar Heel plant operated at higher daily levels last week — finally.
Second, producer-owned pigs' weights are on a rocket, too. See Figure 3. In fact, those animals were, on average, heavier than one year ago last week and are up 5.4 pounds in five weeks...
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