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Supply Issues Remain a Challenge for the Swine Industry

Date: 
Author: 
Kent Bang
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Swine
Home > Education & Events > August 2020 > Supply Issues Remain a Challenge for the Swine Industry
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COVID-19 related issues have continued to weigh heavily on swine operations financial situation. Addressing the key issues that are impacting our market, we start with the pigs that are backed up on the farm. Expectations are that we have 2 to 2.5 million pigs backed up in inventory that producers are still trying to get through a marketing channel. The impact is obvious to the marketplace as there is little demand for additional live pigs. The swine industry is already struggling to harvest and process contracted pigs under existing commitments.

Coming off the lows of early July, cash markets haven’t gained much ground until recent weeks. Even with a small rally there, losses are mounting quickly for those on a cash market basis or finding a negotiated bid for extra pigs. Cash-based prices, based on the Western Corn Belt, have been below $40 per cwt. for the last 16 weeks. I expect those pigs have returned losses of $40 to $50 per head over that period.

Clearing those pigs from inventory and getting current looks to be a very difficult challenge. Harvest numbers have returned to near 95% of capacity on a weekly basis, but that level will make it difficult to get current any time soon.
Many states are seeing another surge in COVID-19 cases, bringing into question many of the food service venues that we count on for additional sales of many products. Restaurants, school systems, and sporting or other social events are going to struggle for a while, or so it appears.

Pork packers are buying cheaper pigs but margins are not as good as one would think. Although the spread between cash and cutout is wider than typical for July-August, the volume of pork that can be boned and processed for case-ready is much lower due to worker shortages. Many, if not most plants are running at 85% of needed workers to run efficiently.
 
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