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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1872

January 1996

AgLetter
HOG NUMBERS TURN UP AGAIN
A December survey by the U.S. Department of Agriculture found that hog numbers have moved back up
above the year-earlier level and that further expansion
will likely occur in the months ahead. The indicated expansion that occurred last fall was a surprise to many
observers who had assumed that breeding problems
during last summer ’s heat wave would extend the
downturn in hog numbers that started last spring.
Even more surprising was the indication that the expansion will extend into the first half of this year, despite very high feed prices and the likelihood of sizable
operating losses for many producers.
The USDA’s most recent quarterly survey of hog
farmers indicated that the number of hogs on farms nationwide reached 60.2 million head as of December 1.
That marked a nominal year-over-year increase, reversing the 1 to 2 percent declines that had been indicated in
the two previous surveys. It also marked the largest inventory for that date since 1980. The inventory of hogs
being raised for market, at nearly 53.1 million head, was
virtually unchanged from the year-ago level. The number of hogs held for breeding purposes was up 1 percent,
perhaps foreshadowing further expansion. The rise in
the inventory of hogs held for breeding purposes was especially large (15 percent) for the seven rapid-growth
states identified below.
The expansion that pushed hog numbers above
year-earlier levels this past fall was the result of another
large rise in the number of pigs weaned per litter. Nationwide, some 8.34 pigs were weaned per litter during
the September-November period, up 2 percent from the
year before and an all-time high. The number of sows
that farrowed during that period was down marginally,
both from a year ago and from the level indicated last
September as producers’ farrowing intentions for the fall
quarter. Ironically, however, the number of sow farrowings was unusually high relative to the inventory of hogs
held for breeding purpose as of the first of September.

Both the high weaning rate and the high ratio of farrowings to breeding stock ran counter to what many analysts had expected following reports of extensive
breeding problems during last summer’s heat wave. At
the same time, however, the high weaning rate and the
intense use of the breeding stock are a reflection of the
production efficiencies that have accompanied what is
now commonly referred to as the industrialization of
hog production in recent years.
The shifting geographical mix in hog production
that has occurred with the industrialization process continued last year, although it was much less apparent for
Iowa than the year before. As of December 1, hog numbers in Iowa were down less than 1 percent from the
year before and down 4 percent from two years ago.
Hog numbers in each of the other four District states—Illinois, Indiana, Michigan, and Wisconsin—also declined
last year. For the four states combined, the decline was 8
percent, both from a year ago and from two years ago.
With the decline, the District states’ share of all hogs nationwide has retreated to nearly 42 percent, down from
The District states’ share of hogs on farms
fell again last year
percent
60

40

Illinois, Indiana,
Michigan, and Wisconsin

20

Iowa

0
1962 ’65

’68

’71

’74

’77

Source: U.S. Department of Agriculture.

’80

’83

’86

’89

’92

’95

47 percent two years ago and the more typical range of
48 to 50 percent that generally prevailed from the early
1960s through the early 1990s.
As the District states’ share of hogs has edged lower, dramatic growth in a handful of other states has more
than made up the difference. There have been only seven states with consistent growth over the last five years
which culminated in a rise in hog numbers that significantly exceeded the 11 percent gain nationwide since
1990. Only two of the seven rapid-growth states—Missouri and North Carolina—are among the 16 states traditionally labeled as major hog producing states.
Collectively, hog numbers in Missouri and North Carolina rose 13 percent last year and have more than doubled
over the last five years. In comparison, hog numbers in
the five District states, as well as in the other nine remaining “major” hog producing states, have declined 3
percent over the last five years.
Outside of the traditional hog-raising areas, the
growth in hog production has been especially apparent
in five states: Colorado, Mississippi, Oklahoma, Utah,
and Wyoming. The five-year rise in hog numbers in
those states ranged from 65 percent in Mississippi to 375
percent in Oklahoma and for the five states combined
was 180 percent. The phenomenal growth of the past
two years has already propelled Oklahoma’s state ranking in hog numbers ahead of four traditional hog raising
states (Georgia, Kentucky, Tennessee, and Wisconsin)
and within near-term striking distance of four others
(Michigan, Kansas, Pennsylvania, and South Dakota).
Together, the seven rapid-growth states now account for 23 percent of all hogs on farms nationwide,
double their share of five years ago. For the most part,
the rapid-growth states have been affiliated with the
proliferation of the so-called mega hog farms. These
large hog farms remain highly controversial, largely
because of environmental concerns related to the handling of animal wastes. In addition, these large farms
entail substantial differences in operational practices
and marketing arrangements as compared with the
more traditional “family farm” system of raising hogs.
Nevertheless, it is increasingly clear that large farms
enjoy greater production efficiencies. Numerous studies, for example, have noted the more intense use of
breeding herds and the higher weaning rates on large
farms which translate into more pork per sow. Reflecting the latter, the number of pigs saved per litter
among producers in the seven rapid-growth states last

year averaged 8.6, about 5 percent better than the average of 8.2 pigs per litter for all other states. Oklahoma,
where hog numbers have more than tripled the last two
years, had the highest weaning rate, 9.3 pigs per litter.
In comparison, hog farmers in Iowa weaned an average
of 8.3 pigs per litter last year while the weaning rate for
the other four District states ranged from 7.9 in Wisconsin to 8.2 in Indiana.
Analysts who focus on near-term trends in the livestock and poultry complex are perplexed, on the one
hand, by the evidence of extraordinarily tight grain supplies and, on the other hand, by the evidence of an upturn in hog numbers and a continuing expansion
throughout the livestock and poultry complex. Conventional wisdom suggests that the decline in available feed
supplies this year will necessitate slower growth and
perhaps outright declines in at least some component of
the livestock and poultry complex. However, the latest
USDA survey of hog farmers points to further slight expansion overall. In conjunction with the slightly larger
inventory of hogs held for breeding purposes, producers
intentions’ reportedly are to increase sow farrowings for
the December-May period by 1 percent. If producers follow through with those intentions and if the uptrend in
pigs per litter continues unabated, the number of pigs
born and raised from December through May could be 3
percent more than in the same period a year ago.
The implications of the latest survey are that pork
production will register another increase in 1996. Preliminary tallies show pork production in the year just
ended was up nearly 1 percent as first-half gains offset
declines during the second half of the year. Because of a
strong rise in exports, however, per capita supplies of
pork available to domestic consumers declined about 1.5
percent in 1995. The number of hogs shipped to packing
plants will likely remain below the year-earlier levels
this winter. By the second quarter, however, hog marketings and pork production will likely move above yearearlier levels. The gains will likely widen to around 4
percent in the second half if producers are expanding as
indicated in the latest quarterly report.
In addition to rising pork production, all other
components of the livestock, dairy, and poultry complex
appear to be expanding. Reflecting this, the latest USDA
projections for 1996 point to increases of 2.8 percent for
all red meats, 5.7 percent for poultry meats, 2.7 percent
for milk, and 2.8 percent for eggs. For each case component, the projected increase for this year exceeds the rise

1995 Farm Prices in Perspective
All Commodities

Corn

Soybeans

index, 1990-92=100
115

dollars per bushel
3.40

dollars per bushel
7.50

3.10

7.00

2.80

6.50

2.50

6.00

2.20

5.50

110
1995
105
1989-93 avg.
100
1994
95
90

1.90
J

M

M

J

S

N

5.00
J

M

M

J

S

J

N

Barrows and gilts

Choice steers
dollars per cwt.
85
80
75
70
65

M

M

J

S

N

12.50

33

N

13.25

38

S

14.00

43

J

dollars per cwt.
14.75

48

M

Milk

dollars per cwt.
53

M

11.75

28

60
J

M

M

J

S

N

11.00
J

M

M

recorded in the year just completed. The expansion in
all areas of livestock and poultry production seems to be
inconsistent with the evidence of sharply lower feed
supplies and the apparent need to lower feeding rates.
Simultaneously, the widespread expansion indicated for
the entire livestock and poultry complex suggests ample
domestic supplies, even with further strong growth in
exports. Hence livestock prices may remain under
downward pressure this year. In the year just completed, barrow and gilt prices averaged about $42.35 per
hundredweight. This year’s average will likely be
somewhat lower given current prospects for rising production of pork and all meats.
Iowa State University reports the break-even cost
of production for hogs marketed in December exceeded
$45 per hundredweight. The break-even on hogs now
being raised for market will be even higher as the feeding costs incorporate more of the recent highs in for corn
prices and the possibility that still higher corn prices
may be needed to ration the lower feed supplies. Production costs vary widely among hog producers. But
even the most efficient will experience very narrow margins, while the average-cost producers will experience

J

S

N

J

sizable losses. More producers will exit the industry this
year than in recent years. The very large, low cost producers are not likely to scale back production much and
some of the newer operations will likely bring more capacity on stream this year. Whether these dynamics
translate into as much pork production for 1996 as now
indicated remains to be seen.
Gary L. Benjamin

AgLetter (ISSN 1080-8639) is published monthly by the Research
Department of the Federal Reserve Bank of Chicago. It is prepared by
Gary L. Benjamin, economic adviser and vice president, Mike A. Singer,
economist, and members of the Bank’s Research Department, and is
distributed free of charge by the Bank’s Public Information Center. The
information used in the preparation of this publication is obtained from
sources considered reliable, but its use does not constitute an endorsement of its accuracy or intent by the Federal Reserve Bank of Chicago.
To subscribe, please write or telephone:
Public Information Center
Federal Reserve Bank of Chicago
P.O. Box 834
Chicago, IL 60690-0834
Tel. no. 312-322-5111

SELECTED AGRICULTURAL ECONOMIC INDICATORS

Percent change from
Latest
period

Value

Prior
period

Year
ago

Two years
ago

Prices received by farmers (index, 1990–92=100)
Crops (index, 1990–92=100)
Corn ($ per bu.)
Hay ($ per ton)
Soybeans ($ per bu.)
Wheat ($ per bu.)
Livestock and products (index, 1990–92=100)
Barrows and gilts ($ per cwt.)
Steers and heifers ($ per cwt.)
Milk ($ per cwt.)
Eggs (¢ per doz.)

December
December
December
December
December
December
December
December
December
December
December

107
117
3.08
80.30
6.71
4.92
96
45.10
64.80
13.90
81.0

0.9
0.9
7.3
–0.9
5.0
2.1
2.1
11.6
–0.6
0.0
6.0

9
10
45
–6
24
32
7
43
–5
9
29

4
8
15
–6
1
36
–1
10
–10
3
27

Consumer prices (index, 1982–84=100)
Food

November
November

154
149

–0.1
0.0

3
3

5
5

December 1
December 1
December 1
November
November
December

6,101
1,833
1,338
2.09
1.61
11.1

N.A.
N.A.
N.A.
–3.8
2.2
4.3

–24
–13
–10
6
–2
0

3
18
–16
10
7
N.A.

August
August
August
August

15,076
7,169
7,884
23

6.2
–3.5
17.5
–64.1

8
17
1
–69

8
20
1
–74

Agricultural exports (mil. dol.)
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)

October
September
October
September

5,137
250
77
134

8.7
19.3
0.2
5.0

18
117
–23
11

33
80
5
23

Farm machinery sales (units)
Tractors, over 40 HP
40 to 100 HP
100 HP or more
Combines

December
December
December
December

5,875
2,923
2,952
1,035

8.3
–5.5
26.4
–9.9

5
9
1
5

19
21
17
14

Production or stocks
Corn stocks (mil. bu.)
Soybean stocks (mil. bu.)
Wheat stocks (mil. bu.)
Beef production (bil. lb.)
Pork production (bil. lb.)
Milk production* (bil. lb.)
Receipts from farm marketings (mil. dol.)
Crops**
Livestock
Government payments

N.A. Not applicable
*22 selected states.
**Includes net CCC loans.

AgLetter is printed on recycled paper
using soy-based inks

Federal Reserve Bank of Chicago
Public Information Center
P.O. Box 834
Chicago, Illinois 60690-0834
312-322-5111

AgLetter

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