Last Friday’s USDA Hogs and Pigs report caught many by surprise with both the magnitude of corrections to previous reports and the size of the current inventory. US producers reported a December 1, 2016 inventory of 65,410,000 pigs. This is the largest on-farm December 1 inventory since 1979 when producers reported an inventory of 67,318,400 pigs. On December 1, 1970, USDA reported an inventory 67,433,000 pigs. Prior to that you have to go back to the war years of 1943-44 to have on farm inventories this large.
One of the big questions – what will next December 1 bring? I doubt if inventory will decline as much as it did in 1971 or 1980 when the December 1 numbers were 62,444,000 pigs and 64,462,000 pigs respectively. This was a decline of 4.989 million head in 1971 and 2.856 million pigs in 1980 from the previous year. With 2 major slaughter plants set to come on-line in 2017 and another in 2018, I don’t think any industry participant expects a decline in pig inventories in the near future.
In the 37 years between 1979 and 2016 our industry has changed considerably. In 1979 there were 9,644,600 females in the kept for breeding category and this dropped to 9,118,000 females in 1980, a loss of 0.5626 million females. In 1980, production tended to be in herds of 50-100 females, with female replacements most often raised on-farm and new genetics introduced via purchased boars in some type of 2- or 3-way rotation cross. A reduction in the breeding herd was easily accomplished by selling potential replacements as market pigs.
Contrast this with the 6,090,400 females in the most recent report. With the vast majority of today’s breeding herd in confinement facilities, it is unlikely that US producers will sell off 0.5 million females in a 1 year time span in the face of declining profits. The females represent a specific genetic investment with genetic premiums paid to suppliers. There are too many linkages with slaughter plants and further processing. In addition, producers have become very adept at using risk management tools that were unknown to producers 35 years ago.