Dr. Steve Meyer, an economist with Kerns and Associates, said processing plant disruptions caused by COVID-19 resulted in the worst financial disaster ever for American hog farmers.
As part of a news briefing on July 21, the National Pork Producers Council outlined the economic devastation caused to pork producers by COVID-19. It urged Congress to act swiftly to preserve their livelihoods.
Dr. Meyer said the value of U.S. pigs produced this year has taken a dramatic hit since the advent of COVID in February.
“If we look at what this year’s production was worth back on March 1, as far as what the futures market said the producers could expect on pricing through the end of 2020 and we compare that to the July 10, the difference is about 4.7 billion dollars,” he said. “Producers haven’t lost that much money yet, but relative to where they were going to be, by the end of the year, they’re going to be about 4.7 billion dollars short.”
Dr. Meyer said, besides producers euthanized some animals, something no producer wanted to or likes to do by any stretch of the imagination. It’s the last thing they want to do, and that factor right there is one of the reasons it looks like things are better now, but they aren’t. Producers have done everything they can to avoid euthanizing pigs. They put them on diets that meet their nutritional needs but don’t provide the energy and protein for growth to hold the pigs to keep them from getting too heavy. In so doing, they backed up supplies of pigs in their other barns across the United States.
“We think that there are two million-plus pigs backed up as of June 1, and the reason those pigs didn’t go to slaughter is that we just don’t have the slaughter capacity to do it,” he said.
Dr. Meyer said plant capacity had recovered dramatically since May when down by about 40 percent to where that reduction is now hovering around five percent.
He suspects that a five percent reduction will be permanent, though, as the result of compliance with social distancing guidelines.
Hog commentator Jim Long believes pork cut-outs will lead the recovery if the hog market gains strength but not by the lean hog futures. Cut-outs will reflect pork demand and supply.
Long agreed that the story of a massive number of backed-up hogs is currently hamstringing the market.

“If you were a pork buyer, would you be aggressively purchasing pork when all you read is a deluge of pork is coming,” asked Long. “The same buyers can see lean hog futures circling 50 cents a pound – not exactly an indicator that the pork price will explode on you.”
He said foreign buyers also read the U.S. pork industry news and keep asking if U.S. packers will keep operating to supply them import needs due to coronavirus issues.
“Three factors – supply, futures, and Coronavirus all negatives for hog price appreciation. That’s why the pork cut-outs price has to lead the way. Only the reality of an appreciating pork price can push back the negatives,” said Long.
In a week in the middle of July, U.S. packers aggressively handled 2,606,000 up 187,000 from a year ago, and slaughter weights continue to decline. Weights have come down 12 pounds plus from the May highs.
“We still can’t rationalize how the industry alleges three million-plus pigs backed up across the USA, but weights continue to drop,” said the hog commentator and president of Genesus Genetics. “Having hogs for four decades, when we backed up hogs, weights went up, not down. Maybe it’s a new paradigm?”
Long believes the breeding herd continues to decline – the latest week about 68,000. Last year averaged 57,000 and expected every day the number of sows is decreasing.
The Genesus US sales team recently named sow herds liquidated or liquidating. Also who they know is backed up with hogs. The sales members identified some sow herds across the Midwest. Few, if any, backed up pigs in Eastern Corn Belt. In the Western Corn Belt, there are some for sure, but certainly not all producers.
“Over the next two weeks, keep watching the hog weights. They’re at around 280-282 pounds now. If average weights go into the 270s, it tells us the number of hogs not backed up is next to nothing.” said Long. “If pork cut-outs continue to climb, it will reflect that buyers have to pay more, not that they want to. With gross packer margins good to excellent, we expect packers to keep pushing kill numbers.”
The surest cure for low prices is low prices. •
— By Harry Siemens