Spring and early summer market prices have many in the pork industry feeling more than a little uneasy.
As of late June, hog slaughter running at least 5% ahead of the same 11-week period a year ago has everybody — hog futures analysts, packers, wholesalers and producers — in a funk about price prospects for the balance of the year.
Some argue that hog numbers, based on farrowing intentions and sow numbers, were off all along. Others are convinced that the near ideal growing conditions throughout hog country so far in 2002 may have pulled some pigs forward. Indisputably, there were more hogs going to market and they were a few pounds heavier than the same spring-early summer stretch last year.
If marketings continue at a similar pace, commercial hog slaughter in the fourth quarter could climb as high as 27.8 million head — roughly 200,000 more than we saw in the fourth quarter of '98. I'm pretty sure I don't need to remind you what happened to prices during that painful stretch.
What Are the Choices?
There are two options here — sit back and take your licks or move marketings forward to take the pressure off the fourth quarter. Veteran hog market prognosticator emeritus Glenn Grimes and fellow economist Ron Plain at the University of Missouri have laid out a step-up, step-down marketing plan that goes like this:
If all producers would speed-up marketings by 4-5% during July, August and September, it would pull 2-3 days of slaughter from the fourth quarter into the third quarter. So, if you normally market 100 hogs/week, Grimes and Plain suggest you sell 104-105/week during those months. By late September, their plan should also pull average market weights down by 4-5 lb from what they would be without action.
Then, reverse the plan. Reduce your marketings from October through December by 4-5%. Instead of marketing 100 hogs weekly, cut back to 95-96/week.
The Missouri economists say the plan should put hog slaughter in the fourth quarter at around 27 million head, just 2% above last year, but more importantly, much closer to our slaughter capacity.
And, they agree, regardless of the June pig crop report, the plan will make marketings more uniform the second half of the year.
This Is a Test
It's a test of your will. Are you willing to make this small marketing adjustment to hopefully avoid a market free-fall?
It's also a test of the “real” commitment of packers to their suppliers. If they truly want to keep all pork producers in business, they will accept these slightly lighter pigs without penalty.
Truth is, some major retailers have made it clear that they don't want the heavy hams and loins so common with modern, heavyweight hogs.
This is a pet peeve of mine. Sure, the heavier weights improve slaughter plant efficiency, but what does it do to finishing efficiency, not to mention consumer attitudes? Unless you've been baling hay or sorting pigs in a newly populated wean-to-finish barn all day, who really needs a 9-sq.-in. pork chop for supper?
Consumers and processors don't need, nor want, these excessively large loins and hams. Now is a good time to pull weights down to a more reasonable level. Today's modern genetics and nutritional programs can give you better quality, excellent primal cuts at more moderate weights.
Here are a couple of other practical reasons why this moderated marketing plan makes sense:
Emptying a finishing barn a few days early buys a little more time to wash it down and let it sit a couple of extra days. That'll give you a couple more days to fix gates and feeders, clean fan blades, check and replace waterers. Heck, you might even take a day off to go fishing. Imagine!
Also, it's common knowledge that lean growth and feed conversion rates level off around 125-150 lb., depending on genetics and environmental factors, then gradually decline. Performance the last four to six weeks is the least efficient. Sure, feed's cheap, but doesn't it make sense to trim off the least efficient segment of a finishing period?
I know, I know — the packer wants heavier hogs. He'll penalize you if you come in with a load under his “preferred” weight. How does $8 hogs sound as a penalty? Besides, packers are just as much a part of this proposal as you are.
The cooperative spirit of this industry will be tested this fall. We're headed for a tough stretch — no doubt about it. The question is — are you up to helping yourself and your pork producing brethren or are you going to simply sit back and take what comes without rethinking your production and marketing strategies?
The 1998 market free fall exceeded most everyone's worst-case scenario. The scars were deep and painful. The Grimes-Plain plan may or may not work. But, isn't it worth a try?