May 2008

May 6, 2008

North American daily average hog prices (carcass - Iowa/Minn.) have improved significantly since mid-April. The Iowa/Minnesota carcass price on May 5 averaged US $74.97 per cwt., which is equivalent to just over C$159 per ckg. The price of Saskatchewan SPI Index 100 hogs on Monday, May 5, ranged from $132 to $142 per ckg. ($144 to $155 per ckg. for Index 109), with last week's price averaging $135.50 per ckg., up from the previous week's average of $126.50 per ckg., but still down from $143.20 per ckg the same week last year.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending May 3, 2008, was estimated at 2.155 million head, down 4.0 per cent from the previous week, but up 9.4 per cent from 1.970 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.261 million head per week, about 11.0 per cent higher than over the same period a year ago. (Table #1) Slaughter numbers over the last four weeks averaged 2.240 million head, up 13.3 per cent higher than over the same period a year ago. Total pork production over the last eight weeks was estimated to average 459 million pounds per week, up 11.3 per cent from 412 million pounds per week over the same time period a year ago. Pork production over the last four weeks averaged 455 million pounds per week, up 13.7 per cent from 400 million pounds per week over the same period a year ago. 

Table 1: United States Weekly Hog Slaughter

Source: USDA, LMIC

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending April 26, 2008, averaged 416,174 head, up 0.8 per cent from 412,957 head for the seven weeks ending April 28, 2007.  In Canada, hogs slaughtered year-to-date ending April 26, 2008, totaled 7.073 million head, up slightly from 7.062 million head over the same period in 2007.  

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending April 26, 2008, averaged 157,726 head, down 4.9 per cent from 165,794 head for the seven weeks ending April 28, 2007.  In Western Canada, hogs slaughtered year-to-date ending April 28, 2008, totaled 2.643 million head, down 6.8 per cent from 2.835 million head over the same period in 2007.

Canadian Live Hog Exports

Based on USDA APHIS data, Canadian weanling and feeder hog exports to the United States averaged 145,855 head per week over the seven weeks ending April 26, 2008, up 19.6 per cent or 23,863 head per week compared to 121,992 head per week over the seven weeks ending April 28, 2007. Year-to-date ending April 26, 2008, total weanling and feeder hog exports to the United States have totaled 2.535 million head, up 23.4 per cent from 2.054 million head over the same period in 2007.  

Canadian slaughter weight hog exports to the United States averaged 52,120 head per week over the seven weeks ending April 26, 2008, down 4.3 per cent or 2,342 head per week from 54,462 head per week over the seven weeks ending April 28, 2007.  Weekly slaughter hog exports since the beginning of April have declined from year ago numbers due to a combination of increased Canadian hog slaughter, particularly Ontario, and more Canadian weanling pigs exported to the United States. Year-to-date ending April 26, 2008, slaughter weight hog exports to the United States have totaled 1,077,870 head, up 16.5 per cent from 925,070 head over the same period in 2007. 

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the seven-week period ending April 26, 2008, averaged 614,149 head per week, up 4.2 per cent from 589,411 head per week over the seven weeks ending April 28, 2007. Year-to-date ending April 26, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 10.686 million head, up 6.0 per cent from 10.042 million head a year ago. We have seen a large increase in weanling and feeder exports to the United States over the last several months, which have been partially caused by the liquidation of some Canadian sow herds and restructuring of the Canadian hog feeding industry. We expect the rate of sow liquidation to increase by the end of the second quarter of 2008, particularly with the Government of Canada's Cull Breeding Swine Program.

Canadian Hog Production

According to the latest Statistics Canada hog inventory report in April, the total inventory of hogs in Canada on April 1, 2008, was 13.000 million head, down 11.7 per cent from 14.729 million head on April 1, 2007, and down 5.9 per cent from 13.810 million head on January 1, 2008. Total Canadian hog inventory has declined since peaking at 15.205 million head on October 1, 2005, and is expected to further decline in 2008.

The Canadian market herd inventory on April 1, 2008, was estimated at 11.502 million head, down 12.6 per cent from 13.158 million head on April 1, 2007, and down 6.4

per cent from 12.283 million head on January 1, 2008. In Western Canada, the market herd inventory on April 1, 2008, was 4.882 million head, down 14.2 per cent from 5.692 million head on April 1, 2007, and down 6.3 per cent from 5.212 million head on January 1, 2008.   Increased exports of live weanling and feeder hogs to the United States over the year are partially responsible for the annual decrease. Canadian hog producers, particularly in Western Canada, have responded to higher feed prices and new United States legislation, Country of Origin Labeling (COOL), by changing more of their operations to weanling/feeder production for sale to the U.S., and contract finishing in the U.S.

The Canadian breeding herd, consisting of sows and bred gilts, was estimated at 1.467 million head on April 1, 2008, down 4.6 per cent from 1.538 million head on

April 1, 2007, and down 1.9 per cent from 1.495 million head on January 1, 2008.  In Western Canada, the breeding herd of sows and bred gilts was estimated at 678,100 head on April 1, 2008, down 3.3 per cent from 701,300 head on April 1, 2007, and down 0.8 per cent from 683,300 head on January 1, 2008. The Canadian breeding herd, given the current financial losses in the industry, will continue to decline in 2008. While many had anticipated a five to 10-per cent drop in the Canadian sow herd over the last quarter, this slow reduction is not necessarily surprising. With the large Canadian losses starting in Sept/Oct 2007, lack of producer options, and time needed to humanely depopulate a sow barn, the process of liquidation takes time. Significant decreases will likely not become apparent until the end of the second or third quarter of 2008. The Government of Canada Cull Breeding Swine Program will guarantee $225 per sow or boar slaughtered outside the human food chain, and is expected to further reduce the Canadian breeding herd.  

According to Statistics Canada data, total farrowing numbers in Canada for 2007 were 3,290,500 head, down 1.2 per cent from 2006.  Farrowing numbers for the first quarter of 2008 were 809,400 head, down 1.8 per cent from the same quarter a year ago. Farrowing intentions for the second quarter of 2008 are estimated at 796,800 head, down 1.6

per cent from the same quarter in 2007. (Table #2) The number of pigs born in 2007 was 34,819,600 head, down 1.7 per cent from 2006. Pigs born in the first quarter of 2008 were 8,708,400 head, down 1.2 per cent from the first quarter in 2007.   

Table 2: Sows Farrowing and Pigs Born, Canada (thousand head)

(1) Estimated Farrowing Intentions
Source: Statistics Canada, April 2008

In Western Canada, the total number of sows that farrowed in 2007 was 1,624,700 head, down 1.3 per cent from 1,645,500 head in 2006. (Table #3) Farrowing numbers for the first quarter of 2008 were 403,900 head, down almost 1.2 per cent from the first quarter of 2007.  Farrowing intentions for the second quarter of 2008 are estimated to be 400,600 head, down 2.8 per cent from the same quarter in 2007. The total number of pigs born in Western Canada in 2007 was 17,765,200 head, down slightly from 17,814,800 head born in 2006.  Pigs born in the first quarter of 2008 were 4,454,600 head, down slightly from the first quarter in 2007.

Table 3: Sows Farrowing and Pigs Born, Western Canada

(1) Estimated Farrowing Intentions
Source: Statistics Canada, April 2008

Pork Cutout Values (All prices in U.S. dollars)

The pork cutout value (185 lb.) in the United States ended the week of May 3, 2008, averaging $74.21 per cwt., up 5.0 per cent from $70.71 per cwt. the previous week, but down $1.53 per cwt. or 2.0 per cent from $75.74 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $58.11 per cwt., down $.59 per cwt. or 1.0 per cent from $58.70 per cwt. the previous week, and down $3.77 per cwt. or 6.1 per cent from $61.88 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $102.04 per cwt., up $8.42 per cwt. or 9.0 per cent from $93.62 per cwt. the previous week, and up $5.55 per cwt. or 5.7 per cent from $96.49 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $83.37 per cwt., up $4.72 per cwt. or 6.0 per cent from $78.65 per cwt. the previous week, but down $14.67 per cwt. or 15.0 per cent from $98.04 per cwt. a year ago. Cutouts for the week were up except for hams. Loins and bellies were up significantly from the previous week and up over the last few weeks. (Table #4)

(Source: Livestock Marketing Information Center)

Table 4: United States Weekly Pork Price Summary (Weekly Average)

Source: Livestock Marketing Information Center

Meat In Cold Storage

The United States' pork stocks in cold storage totaled 657.1 million pounds on March 31, 2008, up 8.5 per cent from 570.3 million pounds on February 29, 2008, and up 32.8 per cent from 494.8 million pounds on March 31, 2007.  Most pork stocks have increased since February, the most notable being bellies (+24.9%).  Year-over-year, bellies in cold storage are up 79.4 per cent, hams are up 55.8 per cent and loins are up 29.5 per cent.

The United States' beef stocks in cold storage totaled 424.1 million pounds on March 31, 2008, unchanged from 424.1 million pounds on February 29, 2008, and down 0.7 per cent from 427.2 million pounds on March 31, 2007.

The United States' poultry stocks in cold storage totaled 1,224.1 million pounds on March 31, 2008, up 3.5 per cent from 1,182.7 million pounds on February 29, 2008, and up 28.4 per cent from 953.3 million pounds on March 31, 2007.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.305 billion pounds on March 31, 2008, up 4.2 per cent from February 29, 2008, and up 22.9 per cent from March 31, 2007. (Table #5) Pork had the largest volume increase since February, followed by chicken.

Table 5: United States Stocks in Cold Storage (Frozen)

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have improved significantly since mid-April. While weekly hog slaughter numbers and pork in cold storage continues to be high, hog prices have rallied from improved seasonal demand and strong pork exports. Weekly U.S. hog slaughter numbers have averaged 2.240 million head per week over the last four weeks, up 13.3 per cent from the same period a year ago. Slaughter numbers over the last week were, however, estimated at 2.155 million head, lower than previous weeks.  Strong spring demand for pork cutouts since early April, with bellies increasing $30/cwt. or 56 per cent and loins increasing $27/cwt or 35 per cent have helped push hog prices up.  Strong pork exports have helped increase the demand for live hogs by 8.0 per cent in the United States for the first three months of 2008, according to Glenn Grimes and Ron Plain from the University of Missouri.

The nearby lean hog futures contracts had been increasing mid-to late April before retreating over the last week.  Improved pork cutout prices, strong export demand, and expectations of lower hog numbers looking forward have contributed to the overall improvement in lean hog futures prices over the last month.  (Table #6)

Table 6: United States Lean Hog Futures

Source: Chicago Mercantile Exchange 

Based on the current lean hog futures prices and Canadian exchange rate futures, the futures market is indicating that Saskatchewan Index 100 hogs could average between $134 to $139 per ckg for the remainder of the second quarter of 2008, and average between $132 to $137 per ckg. for the third quarter of 2008.

The rate of North American sow liquidation and reduced pork production will be important in stimulating higher pork prices in 2008. Live hog demand from strong pork exports have helped improve market prices and could continue to strongly influence prices in the coming months.  If live hog demand continues to increase, North American supply numbers may not be as critical.  We expect the commodity markets will continue to be volatile over the coming months, reflecting changes in supply and demand estimates as sow liquidation continues. We expect changes in U.S. weekly hog slaughter numbers will continue to be important in determining market direction and pricing. Global pork exports, particularly to China, and local consumer demand for pork will also continue to be key factors influencing hog prices in 2008.

For more information contact the Livestock Development Branch:
Brad Marceniuk
Livestock Economist
933-5098
Brad.Marceniuk@gov.sk.ca