U.S. Slaughter Weights Continue to Decrease — Jim Long

U.S. slaughter weights continue to decrease. A week ago Iowa/South Minnesota live weight market hogs were 283.9 lbs., down 2.5 lbs. from two weeks before. A year ago, during pandemic, backed up hogs averaged 295.1 lbs. Year over year same week 11.2 lbs. lower.

U.S. Hog slaughter year to date as of last Saturday 48,851,000; a year ago 47,995,000. Year to date plus 856,000 (1.8%)

When we do farmer arithmetic what current weights and number of hogs slaughter means this is our calculation:

• 11.2 lbs. year over year weight difference ÷ 2.2 lb. a day estimated gain = 5.1 days of gain.
• last week slaughter 2,395,000 ÷ 7 days = 342,142 hogs per day.
• 342,142 hogs per day x 5.1 days = 1,744,928 hogs (our estimate of what 11.2 lbs. difference is in total hogs)

Farmer Arithmetic:

1,744,928

- 856,000

________________

808,928 (hogs)

We estimate, when calculated weight difference, are at about 808,928 fewer hogs to be slaughtered at this time when we factor 11.2 lbs. lighter hogs then a year ago. Two further points:

• A year ago some rations were in place to slow hog growth no such thing this year.
• Also there has been no hot weather to slow growth year to date.

Other Observations

We sold hogs Friday for $115.60 base. U.S. Pork cut-outs closed at $115.70. Not much spread is it?

Had some Packers point out to us last week on producer comment that Packers had margins in processing beyond cut-out calculation. Their point was this extra margin opportunity is being limited by lack of labor to get the processing done. We were told by four different Packers they each were short hundreds of employees.

The U.S. government policy to pay people to stay at home during the pandemic is certainly being blamed for this labor shortfall. This is not only bad for Packers but also Producers, as more money in a short for hogs market is being limited by the labor shortage.
U.S. Pork cut-outs at $115.70 lb. pale compared to Choice Beef cut-outs $316.14 lb. We still find it amazing that our industry fails to comprehend the benefits of better tasting pork. Look at the Beef price. Why do consumers pay more for Beef? Taste.

Friday May 14th U.S. Pork Cut-outs

Loin and Hams are about 50% of carcass. The destruction of taste by making pork too lean can be seen in lower price for these two products. Consumers vote with their money - Ribs, Bellies and Butt all with more marbling lead the cut-out prices. Consumers pay for taste. The foolishness of the Other White Meat program that encouraged producers to make pork like Chicken can be seen in consumer preference.

Sow Mortalities

A funny reader last week commenting on high sow mortalities and epidemic of sow prolapses came up with name for the phenomenon - Prolapses Is Coming (PIC)

Out of China

Confusing info. Some official reports have no decrease in production. On the ground reports indicate a 20-50% decrease from second wave of ASF. We expect the on the ground reports to be the direction.

Hog Prices in China have continually decreased over the last few weeks. We expect this is from liquidation of hogs triggered due to ASF. Scenario – kill them at whatever weight before they die.

On January 13th China’s hog price was $2.52 U.S. liveweight a lb. On May 5th the price was $1.54 U.S. liveweight a lb. A drop of almost $1.00 a lb. or $250 on a 250 lb. hog.

To keep in perspective $1.54 U.S. lb. is still a very good price but a $250 per head decrease is huge on a country wide hog inventory reported to be around 415 million head. It’s over $100 billion U.S. dollars decrease in hog market value.

When you look at publicly listed swine companies in China the debt load undertaken over the last two years is massive. Most if not all have added billions of U.S. dollars in debt. The huge drop in inventory value, high cost of production ($1.25 U.S. lb. or more), dead pigs from ASF, and debt load could lead to some scenarios similar to the U.S. in 1998, when several debt loaded fast expanding companies ended up with new ownership.

We are a history major. We believe history repeats. There will be like USA 1998, winners and losers.