Heavier dressed weights are nudging 2018 pork production higher and there are a few factors driving that, according to an analysis by an Agricultural Economist in USDA’s latest Livestock, Dairy and Poultry Outlook report.
Commercial pork production is expected to be 26.9 billion pounds in 2018. That is 5.2 percent above a year ago. This forecast represents an increase of 25 million pounds from last month’s forecast and is due to higher than expected dressed weights of slaughtered hog carcasses.
This upward revision is notable because the pace of slaughter so far this year has been slower than expected. Higher carcass weights have more than offset lower than expected slaughter numbers.
A number of factors to explain the year-over-year higher weights registered so far in 2018.
First, despite recent feed price increases related to South American weather events, costs of feeding hogs — which typically constitute more than half of production expense — remain moderate, and producer returns in the first two months of the year have been positive. Further, winter weather conditions in principle hog production areas have not been unduly harsh. In addition, most packer pricing grids tend to favor heavier carcasses, which drive down processing costs.
Apart from these factors, two additional elements, related to the recent expansion of Midwestern processing capacity, may help to explain higher first-quarter dressed weights, Haley explained.
The first is likely a timing issue: Although many sow farms are currently in multiple stages of start-up, hog-finishing capacity associated with the ongoing industry expansion — which requires far less complex facilities to site, permit, and construct — may be running ahead of sow farms’ current ability to supply pigs. This would leave excess finishing space, creating somewhat less pressure to market existing animal inventories.
This relative absence of “push-through pressure” is likely to disappear, however, once sow farms come online and begin to supply animals to finishing barns constructed for that use, Haley warned.
A second factor likely contributing to higher dressed weights is the apparent ongoing tug-of-war between producers and packers to maintain processing margins. Margins have been under particular pressure since the increase in processing capacity late last year. There is anecdotal evidence suggesting that since early February, some packers have slowed slaughter rates and limited Saturday slaughter, in efforts to boost margins, which started out the year sharply lower than a year earlier.
Producers, for their part, likely have some added leverage with excess finishing capacity, which may allow more marketing flexibility.
Source: meatingplace.com, 3-14-2018