April 2024

When subtraction leads to larger pig crops

We prefer addition over subtraction. We add extra stuff to our shopping carts. We add more commitments to our calendars.

Farmers typically view "more as better." Farmers add acres. They add animal numbers. Adding to an operation can help capture economies of scale. For example, building larger facilities takes more capital than smaller facilities, but investment per unit of capacity is typically lower. Larger facilities spread fixed costs across more animals–if producers operate the facility near capacity.

Pork producers are getting more pigs per litter. They’re also farrowing a higher percentage of their breeding herds. Those trends enable producers to add to pig crops by subtracting females from their breeding herds. But recent exceptional performance gains may not continue.

Understanding the trade-offs

Further gains in breeding herd efficiency could enable producers to subtract more females from their breeding herds, which would lower the cost per pig weaned.

However, suppose producers reduce their breeding herds. Further suppose either one of the two factors that have been improving breeding herd efficiency reverse. Producers could fall short of farrowing enough pigs to fill finishing facilities. That would spread fixed costs of finishing facilities over fewer hogs. Total cost per market hog would rise.

Data provide documentation

The March 1, 2024 US swine breeding inventory was 6.016 million head according to data producers provided to USDA’s National Agricultural Statistics Service for the Quarterly Hogs and Pigs report (Table 1). This was down 2.1% from March 1, 2023 and the smallest March 1 breeding inventory since 2016. The March 1 US breeding herd peaked in 2020 at 6.475 million head.

Producers farrowed 2.875 million sows during December 2023-February 2024, down 2.6% from the previous year. The average pigs saved per litter nationally was 11.53, up 4.6% from 11.02 the year prior and the highest December-February pigs saved per litter ever. The 33.148 million head December 2023-February 2024 pig crop was up 1.9% from the year prior.

Given the surge in litter rates, producers could have trimmed the number of sows farrowing by 4.4% to 2.822 million and the December 2023-February 2024 pig crop would have still matched the December 2022-February 2023 quarter.

Table 1. USDA quarterly hogs and pigs report summary.

How many sows are enough?

Many factors influence litter rates. These include genetics, parity distribution, nutrition, management and disease. Improvements in these areas help producers continue getting more pigs per litter.
During December 2023-February 2024 producers farrowed 47.93% of the December 1, 2023 breeding herd (Figure 1). This was the highest breeding herd utilization ratio for this quarter since the December 2019-February 2020 farrowing period.

Figure 1. US breeding herd utilization.

The prior three years the ratio of the December-February sows farrowed to the December 1 breeding herd averaged 47.43%. At this ratio, an additional 64,000 sows would have been needed in the breeding herd to match the 2.875 million sows farrowed during the December 2023-February 2024 period.

Producers have made investments in facilities and equipment in recent years. Deciding to leave a new sow barn empty, or at reduced capacity, is difficult. Larger and more integrated producers likely have stronger incentives to retain their breeding herds at current levels, or cut them less.

Coordinating farrowing with finishing

Trimming breeding herd size with the expectation that a high breeding herd utilization and large gains in litter rates will continue could shave costs. But suppose a producer trims the breeding herd, and then faces a disease outbreak that trims pigs per litter. The breeding herd could turn out too few pigs to fill finishing facilities. Operating finishing facilities below capacity spreads fixed costs over fewer hogs, which ups cost per head and erodes profit.

Sending a few more sows to market is not a profit-making strategy. According to the Commodity Costs and Returns series for Farrow-Finish production, published by USDA’s Economic Research Service, income from culls only accounts for about 2% of the total gross value of production. But breeding those extra sows avoids the risk of not farrowing enough pigs to fill finishing facilities.

Litter rate gains likely to slow

The last four quarterly litter rates were 11.36, 11.61, 11.66 and 11.53 for March-May 2023, June-August 2023, September-November 2023 and December 2023-February 2024, respectively. All were record pigs saved per litter for their respective quarters and represented year-over-year gains of 3.3%, 4.3%, 3.9% and 4.6% (Figure 2).

Figure 2. year over year change in US pigs saved per litter.

Let’s say the next four quarterly litter rates are 11.47, 11.73, 11.78 and 11.65 for March–May 2024, June–August 2024, September-November 2024 and December 2024–February 2025, respectively. These would all be record pigs saved per litter for their respective quarters but would only represent year-over-year increases of 1.0% which has been the average since 2000.

Recent litter rates have been exceptional. The year-over-year changes have been exceptional. Expect a slowing rate of increase going forward. If nothing else, we will be comparing to a high base period a year prior. This, however, does not mean litter rates will decrease.

Commercial slaughter and price forecasts

Table 2 contains the Iowa State University price forecasts for the next four quarters. Prices are for the Iowa-Minnesota producer sold weighted average carcass base price for all purchase types. Basis forecasts along with lean hog futures prices are used to make cash price projections. The table also contains the projected year-over-year changes in commercial hog slaughter.

Table 2. Commercial hog slaughter projections and price forecasts.

 

Lee Schulz, extension livestock specialist, 515-294-3356, lschulz@iastate.edu

Author

Lee Schulz

extension economist
515-294-3356
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