What is in this article?:
• One common explanation of the recent low slaughter numbers is that death losses from the PED virus (porcine epidemic diarrhea) has reduced the market herd much more than had previously been thought.
• However, there are other explanations that need to be considered.
Other possibilities explored
So, what other explanation is there for the very low slaughter numbers over the past seven weeks?
One involves the very nature of the way the industry evaluates numbers, and that is by comparing this year’s slaughter to the slaughter for the same period one year ago. When numbers viewed in this manner appear unusual, it can be because of aberrations this year, but also due to aberrations in the numbers a year ago.
What is being viewed as a very low slaughter level this year, may be due to an aberration in the slaughter numbers a year ago. The unusually high slaughter in the late-summer of 2012 was being driven by the drought and the impact on hog slaughter numbers.
The 2012 drought rapidly pushed corn and meal prices to peaks in August and September of 2012. Record high feed prices and large anticipated losses provided a grave outlook for the industry and some began to adjust.
Sow slaughter rose as some producers tried to quickly reduce their herd size and others decided to exit the industry.
Secondly, producers began to advance shipments of market hogs to reduce losses on every pound being produced. Marketing weights prior to the drought had been running nearly two percent higher. Those began dropping in August, eventually reaching about two percent lower by the fall of 2012.
As a result, slaughter was up over five percent from mid-August through September of 2012.
This year, the outlook is almost opposite. Feed prices (especially corn) have been falling sharply. The hog outlook is profitable and producers are more likely to be retaining or building the breeding herd and weights are expected to increase as producers hold onto market hogs longer to gain profits on every pound.
To the extent recent low slaughter numbers are explained by the unusual economic conditions in the late-summer of 2012 compared to this year, USDA’s recent inventory numbers may not be so far off.
Those show that the breeding herd is only fractionally larger than a year-ago. This would be consistent with an industry which has not yet had time to expand the herd. Expansion of one to two percent can be expected to be revealed in the December and March 2014 inventory counts. USDA’s inventory count did show that market hogs of 180 pounds or higher were down four percent.
This is reasonably consistent with the five percent lower slaughter supplies that have recently been experienced.