February 2008

This information is provided as a resource by SMA staff.  All stated prices are averages.
All prices are in Canadian dollars unless otherwise noted.
Please use this information at your own risk.

North American daily average hog prices (carcass - Iowa/Minn.) have been trending upward over the last week after sliding in late December. The Iowa/Minnesota carcass price on February 4 averaged US $56.55 per cwt., which is equivalent to just under $118 per ckg. (Cdn. $). The price of Saskatchewan SPI Index 100 hogs on Monday, February 4, ranged from $94 to $104 per ckg. ($102 to $113 per ckg. for Index 109), with last week's price averaging $97.60 per ckg., down from $131.90 per ckg the same week last year. Increased pork cutout values over the last two weeks have contributed to higher prices, while U.S. hog slaughter numbers remain high.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending February 2, 2008, was estimated at 2.276 million head, down 1.2 per cent from the previous week, but up 11.2 per cent from 2.048 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.253 million head per week, about 10.4 per cent higher than over the same period a year ago. (Table#1) Slaughter numbers over the last four weeks averaged 2.358 million head, 13.9 per cent higher than over the same period a year ago. Total pork production over the last eight weeks was estimated to average almost 461 million pounds per week, up 11.4 per cent from 413 million pounds per week over the same time period a year ago. Pork production over the last four weeks averaged just over 483 million pounds per week, up 15.1 per cent over the same period a year ago. 

Table 1: United States Weekly Hog Slaughter

Source: USDA

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending January 26, 2008 averaged 391,284 head, unchanged from 391,339 head for the seven weeks ending January 27, 2007.  In Canada, hogs slaughtered year-to-date ending January 26, 2008, totaled 1.650 million head, up 0.8 per cent from 1.638 million head over the same period in 2007.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending January 26, 2008, averaged 143,693 head, down 7.8 per cent from 155,767 head for the seven weeks ending January 27, 2007.  In Western Canada, hogs slaughtered year-to-date ending January 28, 2008, totaled 598,535 head, down 9.2 per cent from 658,976 million head over the same period in 2007. The push for double-shifting at the Brandon plant, in conjunction with the closure of the Schneider's plant in Winnipeg, has increased Maple Leaf slaughter numbers in Brandon to more than the combined plants slaughtered before the changes. As the Brandon plant continues to expand its double shift, slaughter numbers should continue to increase and narrow the gap from last year.

Canadian Live Hog Exports

Based on USDA APHIS data, Canadian weanling and feeder hog exports to the United States averaged 147,926 head per week over the seven weeks ending January 26, 2008, up 26.2 per cent or 30,734 head per week compared to 117,192 head per week over the seven weeks ending January 27, 2007.

Canadian slaughter weight hog exports to the United States averaged 79,444 head per week over the seven weeks ending January 26, 2008, up 27.1 per cent or 16,955 head per week from 62,489 head per week over the seven weeks ending January 27, 2007.  

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the seven-week period ending January 26, 2008, averaged 618,655 head per week, up 8.3 per cent from 571,020 head per week over the seven weeks ending January 27, 2007.  We have seen a large increase in slaughter weight exports to the United States over the last few weeks, which was partially caused by the liquidation of some Canadian sow herds. Large losses are forcing many producers to close their operations. We expect sow liquidation to increase by the second quarter of 2008 if prices don't improve significantly.

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

The pork cutout value (185 lb.) in the United States ended the week of February 2, 2008, averaging $59.33 per cwt., up $3.52 cwt. or 6.3 per cent from $55.80 per cwt. the previous week, but down $5.43 per cwt. or 8.4 per cent from $64.75 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $48.74, up $6.91 per cwt. or 16.5 per cent from $41.83 per cwt. the previous week, but down $2.84 per cwt. or 5.5 per cent from $51.58 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $72.71 per cwt., up $2.76 per cwt. or 3.9 per cent from $69.95 per cwt. the previous week, but down $7.48 per cwt. or 9.3 per cent from $80.19 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $75.81 per cwt., up $3.55 per cwt. or 4.9 per cent from $72.26 per cwt. the previous week, but down $11.03 per cwt. or 12.7 per cent from $86.84 per cwt. a year ago. Cutouts for the week were all higher, particularly hams. (Table#2)  (Source: Livestock Marketing Information Center)

Table 2: 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 464.3 million pounds on December 31, 2007, down 2.1 per cent from 474.3 million pounds on November 30, 2007, but up 4.9 per cent from 442.5 million pounds on December 31, 2006.  Stocks of bellies, ribs and butts have increased from November, while hams decreased. Year-over-year hams in cold storage are up 25.0 per cent, bellies are up 32.4 per cent, while ribs are down 19.3 per cent.

The United States' beef stocks in cold storage totaled 482.8 million pounds on December 31, 2007, up 2.0 per cent from 473.5 million pounds on November 30, 2007, and up slightly from 482.0 million pounds on December 31, 2006.

The United States' poultry stocks in cold storage totaled 986.9 million pounds on December 31, 2007, up 9.1 per cent from 904.8 million pounds on November 30, 2007, and up 1.4 per cent from 973.5 million pounds on December 31, 2006.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 1.934 billion pounds on December 31, 2007, up 4.4 per cent from November 2007, and up 1.9 per cent from December 2006. (Table #3) Chicken had the largest volume increase since November, followed by beef.

Table 3: United States Stocks in Cold Storage (Frozen)

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have started trending higher over the last week after sliding in late December. Weekly U.S. hog slaughter numbers have been high, averaging 2.358 million head per week over the last four weeks, which is up almost 14 per cent from a year ago. U.S. pork production has increased by just over 15 per cent to average just over 483 million pounds per week over the last four weeks, compared to the same period a year ago. While U.S. hog slaughter numbers and pork production remain high, pork cutout values have increased over the last two weeks.  Pork in cold storage had decreased from November to December, but continues to be 4.9 per cent higher than December 2006. In their February 1 Hog Outlook, Glenn Grimes and Ron Plain of the University of Missouri commented that United States pork demand at the consumer level in 2007 was up 2.6 per cent, while U.S. live hog demand was up 3.6 per cent from 2006, based on preliminary data.

The lean hog futures market has been trending higher over the last week.  The June, July, and August contracts have had significant increases with Monday's settlement prices over $81. An expectation of more United States pork exports to China is one factor probably helping the market. A combination of sow liquidation in Canada and the United States, along with a new strain of PRRS in the mid-west United States probably also has traders anticipating a reduction in current U.S. pork production by the summer of 2008. While we know there will be a reduction in North American pork production, how much and how quick is still somewhat uncertain. (Table #3)

Table 3: United States Lean Hog Futures

Source: Chicago Mercantile Exchange           

Based on current lean hog future prices, the futures market is indicating that Saskatchewan 100 Index hogs will average between $105 to $110 per ckg for the remainder of the first quarter of 2008, average between $135 to $140 per ckg in the second quarter, and average between $130 to $135 per ckg for the third quarter of 2008. Based on current supply and demand estimates, many economists are predicting lower second and third quarter prices than the current futures markets indicate. The recent jump in summer futures prices may provide producers an opportunity to reduce some forward price risks. While we know North American sow liquation is occurring, the rate of liquation may not be fast enough to meet these prices.  The Statistics Canada hog inventory numbers will be out next week for the January 1, 2008, period.  With sow liquidation often lagging due to the nature of the business, we may not see the true sow liquidation results until the second quarter in 2008. 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. Changes in U.S. weekly hog slaughter numbers will 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
bmarceniuk@agr.gov.sk.ca