Hog Producers Face Incentive Challenges Amidst Production Declines

Jul 11, 2023

According to USDA Livestock Analyst Shayle Shagam, the numbers from the latest quarterly USDA Hogs and Pigs report paint a discouraging picture for hog producers. Shagam emphasizes that producers are not showing much interest in expanding production, and instead, there may be declines in hog production in the coming months.

The report reveals a significant drop in farrowings during the March through May quarter, and producers have expressed intentions to further reduce farrowings during the summer and fall quarters. Projections indicate a 4% decrease in hog farrowings for June through August compared to the previous year, followed by a 4.5% decline for September through November.

According to Shagam, the anticipated increase in pigs per litter would most likely be insufficient to compensate for the decrease in farrowings. Due to negative returns and low profitability, hog growers have no motivation to increase production. In fact, for the year, expected returns for average size farrow finish operators in Iowa have been negative.

The bearish market conditions are evident in low hog prices, with prices at the national base lean price benchmark around $58-$59 per hundredweight, significantly lower than the $70 observed in the same period last year. While there has been some recovery in recent weeks, hog prices are still around $10 per hundredweight lower than they were last year.

Hog producers currently face challenges and disincentives to expand production, leading to reduced farrowings and a bearish market outlook for the industry.

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