Hog Profit Margins Could Push Up Pork Supplies by Year End, Gro Predicts

Lean hog futures are pricing in strong profitability for this year, motivating US hog producers to begin to incrementally increase the size of their breeding herds. By year end, producers’ breeding herd expansions could increase the US’ harvestable hog headcount and lift the year’s US pork production by 1%, according to a new Gro analysis. 

This slight shift in producer sentiment is important as the US hog market has been pointing to a 2.5% contraction in supplies through at least the first half of this year, as Gro wrote about here.  

In the USDA’s latest inventory report, in December, hog producers reported a 29,000 head year-over-year increase in breeding sows, as shown in this Gro display. That corresponds with more than 2 million additional US hog headcounts 10 months out if they hold the current breeding herd size of 6.15 million and continue farrowing; a market hog’s life cycle includes nearly a four-month gestation period and a six-month grow-out period. 

If achieved, this increase in US breeding sows could signal that the bottom of the marketing herd could be in place before the end of the second quarter. This development would also mark the end of the two-and-a-half-year hog herd contraction. In December, the US hog herd was estimated at 73.1 million head, down 1.3 million from the prior year. 

The US breeding sow expansion’s pace will be strongly influenced by feed prices and the US Supreme Court’s upcoming ruling on California’s Proposition 12, a law that establishes minimum space requirements for farrowing sows. 

Before increasing piglet headcounts, producers need to be confident about the direction of feed prices. Currently, Gro’s Hog Feed Price Index, part of the Gro Custom Price Index application, is 11% off last year’s highs. In the US, the last major hog expansion occurred in 2015-19, when feed prices were low and relatively stable.

A US Supreme Court ruling on California’s Proposition 12, which had been expected for next month, is pending, but in December a California judge put a stay on enforcement of the law through June. Proposition 12, which passed in November 2018, took effect at the start of January 2022 but was quickly put on hold and has been delayed three times.