Swine inventory grows in Illinois; demand outlook positive

U.S. hog farmers contracted the herd in recent months, but those in Illinois actually expanded statewide compared to last year.

And while feed costs remain a challenge, herd growth in the Prairie State could turn out to be a positive development based on the outlook for prices and demand.

USDA’s quarterly hogs and pigs report pegged the swine inventory in Illinois at 5.25 million head as of March 1 with a market hog inventory of 4.67 million head. While those estimates are both down 4% from the previous quarter, they both represent a 2% gain compared to the same time last year.

The breeding inventory in the state totaled 580,000 head March 1, up 10,000 head from December and unchanged from last year.

Nationwide, the inventory of hogs and pigs declined 2% to 74.8 million head while the breeding inventory (6.21 million head) declined 3% as of March 1 compared to last year.

“If history is any indication, we could see further downward revisions (to herd estimates),” Joe Kerns, of Partners for Production Agriculture, said during a recent teleconference hosted by the National Pork Board (NPB). “This is very, very bullish.”

The combination of tighter hog supplies and strong pork demand could boost the annual average hog price by 25 to 27% this year compared to 2020, according to James Mintert, director of the Center for Commercial Agriculture at Purdue University.

USDA raised its per capita pork consumption estimate to 52 pounds per person for 2020 and 52.5 pounds this year, both near decade-highs.

“With continued strong grocery store demand and further prospects for restaurants reopening as more U.S. citizens are vaccinated against COVID-19, the market looks promising,” said Jason Franken, Western Illinois University economist and contributor to the University of Illinois farmdoc team.

U.S. citizens currently sit on an estimated $1.6 trillion in additional savings this year compared to last year, noted Bill Even CEO of NPB.

Daniel Bluntzer of NFC Markets believes pent-up demand bodes well for products such as bacon, hot dogs and sausage once more restaurant and food service outlets reopen, even with higher hog prices which recently reached triple digits per hundredweight.

“I don’t think we’ve seen any evidence of a slowdown in demand (due to higher hog prices),” Kerns said.

Hog returns continue to be tempered, though, by higher feed costs which increased from $72 on a per head marketed basis last August to $87 per head for hogs marketed in January, according to Iowa State University data.

“It’s easy to say that feed costs need to be managed, but not quite so easy to say how they should be managed,” Mintert said.

The ag economist suggests hog farmers consider using tools such as cash forward contracting of grain and meal supplies, long hedging in the corn and soy meal futures markets or the purchase of corn or meal call options in place of long hedges. Farmers could also consider using a relatively new tool from the Chicago Board of Trade in the form of short-dated new-crop options, Mintert added.