March 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.

March 11, 2008

North American daily average hog prices (carcass - Iowa/Minn.) have been trending downward after almost averaging US $60 per cwt on Feb 20, 2008. The Iowa/Minnesota carcass price on March 11 averaged US $52.60 per cwt., which is equivalent to over $109 per ckg. (Cdn. $). The price of Saskatchewan SPI Index 100 hogs on Tuesday, March 11, ranged from $91 to $101 per ckg. ($99 to $110 per ckg. for Index 109), with last week's price averaging $98 per ckg., down from $130 per ckg the same week last year. Higher slaughter numbers and pork production, with increased U.S. pork in cold storage, have pushed hog prices downward.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending March 8, 2008, was estimated at 2.227 million head, up 1.8 per cent from the previous week, and up 4.9 per cent from 2.123 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 11.5 per cent higher than over the same period a year ago. (Table#1) Slaughter numbers over the last four weeks averaged 2.210 million head, almost 10.2 per cent higher than over the same period a year ago. Total pork production over the last eight weeks was estimated to average almost 458 million pounds per week, up almost 12.3 per cent from 409 million pounds per week over the same time period a year ago. Pork production over the last four weeks averaged just over 450 million pounds per week, up 11.0 per cent 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 March 1, 2008, averaged 433,429 head, up 1.6 per cent from 426,581 head for the seven weeks ending March 3, 2007.  In Canada, hogs slaughtered year-to-date ending March 1, 2008, totaled 3.762 million head, up 0.6 per cent from 3.740 million head over the same period in 2007.  Increased hog slaughter numbers in Ontario have increased the total Canadian hog slaughter numbers from year-to-date 2007 numbers, even with the decrease in Western Canadian hog slaughter numbers.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending March 1, 2008, averaged 158,579 head, down almost 6.1 per cent from 168,796 head for the seven weeks ending March 3, 2007.  In Western Canada, hogs slaughtered year-to-date ending March 1, 2008, totaled 1.383 million head, down 7.6 per cent from 1.496 million head over the same period in 2007. The push for double-shifting at the Brandon Maple Leaf 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. However, the closure of the Mitchell's plant in Saskatoon on June 1, 2007, is the main reason for the drop in slaughter capacity in Western Canada from a year ago. 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 153,499 head per week over the seven weeks ending March 1, 2008, up 27.9 per cent or 33,513 head per week compared to 119,987 head per week over the seven weeks ending March 3, 2007. Year-to-date ending March 1, 2008, total weanling and feeder hog exports to the United States have totaled 1.345 million head, up 26.0 per cent from 1.068 million head over the same period in 2007.   

Canadian slaughter weight hog exports to the United States averaged 71,294 head per week over the seven weeks ending March 1, 2008, up 38.2 per cent or 19,705 head per week from 51,588 head per week over the seven weeks ending March 3, 2007.  Year-to-date ending March 1, 2008, slaughter weight hog exports to the United States have totaled 654,469 head, up 34.5 per cent from 486,458 head over the same period in 2007.  

Culled sow exports to the U.S., year-to-date, have increased by 8.6 per cent.

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the seven-week period ending March 1, 2008, averaged 658,222 head per week, up 10.0 per cent from 598,156 head per week over the seven weeks ending March 3, 2007. Year-to-date ending March 1, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 5.761 million head, up 8.1 per cent from 5.294 million head a year ago. We have seen a large increase in weanling, feeder, and slaughter weight 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. Large losses have forced some producers to close their operations or look at reducing losses by finishing their hogs south of the border. We expect sow liquidation to increase by the second or third quarter of 2008 as prices have not improved significantly.

Canadian Hog Production

According to the latest Statistics Canada hog inventory report in February, the total inventory of hogs in Canada on January 1, 2008, was 14.010 million head, down 6.0 per cent from 14.907 million head on January 1, 2007, and down 2.4 per cent from 14.360 million head on October 1, 2007. 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 January 1, 2008, was estimated at 12.461 million head, down 6.5 per cent from 13.328 million head on January 1, 2007, and down 2.7 per cent from 12.806 million head on October 1, 2007. In Western Canada, the market herd inventory on January 1, 2008, was 5.357 million head, down almost 7.1 per cent from 5.764 million head on January 1, 2007, and down 2.7 per cent from 5.504 million head on October 1, 2007.   Increased exports of live weanlings 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 incoming 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 1.517 million head on January 1, 2008, down 1.9 per cent from 1.546 million head on

January 1, 2007, and down slightly from 1.522 million head on October 1, 2007.  In Western Canada, the breeding herd of sows and bred gilts was estimated at 688,700 head on January 1, 2008, down 2.2 per cent from 704,100 head on January 1, 2007, and down slightly from 691,000 head on October 1, 2007. 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, 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 will take time and probably won't show significant decreases until the second or third quarter of 2008. Canadian support programs are not sufficient to help producers stay afloat or alter their financial decisions, and come mostly in the form of loans. The recent culled breeding program announced by the Government of Canada 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, total farrowing numbers in Canada for 2007 were 3,265,500 head, down 1.9 per cent from 2006.  Estimated farrowing numbers for the first and second quarters of 2008 are 824,400 head and 800,100 head, respectively, down slightly from the same quarters in 2007. (Table#2) With the current losses, we would not be surprised if the numbers are revised downward in the next Statistics Canada report. The number of pigs born in 2007 was 35,010,600 head, down almost 1.2 per cent from 2006. 

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

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

In Western Canada, the total number of sows that farrowed in 2007 was 1,630,600 head, down almost one per cent from 1,645,500 head in 2006. (Table#3) Farrowing intentions for the first and second quarters of 2008 are estimated to be down slightly from the same quarters in 2007. The total number of pigs born in Western Canada in 2007 was 17,890,600 head, up slightly from 17,814,800 head born in 2006.

Table 3: Sows Farrowing and Pigs Born, Western Canada

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

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

The pork cutout value (185 lb.) in the United States ended the week of March 8, 2008, averaging $59.28 per cwt., down $1.17 per cwt. or 1.9 per cent from $60.45 per cwt. the previous week, but down $9.04 per cwt. or 13.2 per cent from $68.32 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $46.68 per cwt., down $0.98 per cwt. or 2.1 per cent from $47.66 per cwt. the previous week, and down $7.43 per cwt. or 13.7 per cent from $54.11 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $75.31 per cwt., down slightly from $75.43 per cwt. the previous week, and down $9.12 per cwt. or 10.8 per cent from $84.43 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $73.50 per cwt., down $3.81 per cwt. or 4.9 per cent from $77.31 per cwt. the previous week, and down $21.47 per cwt. or 22.6 per cent from $94.97 per cwt. a year ago. Cutouts for the week were all lower, particularly bellies. (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 563.6 million pounds on

January 31, 2008, up 22.9 per cent from 458.7 million pounds on December 31, 2007, and up 16.4 per cent from 484.3 million pounds on January 31, 2007.  Most stocks have increased since December, the most notable being the more-than-70-per cent increase in hams. Year-over-year, hams in cold storage are up 27.8 per cent and bellies are up 48.2 per cent, while ribs are down 10.4 per cent.

The United States' beef stocks in cold storage totaled 445.2 million pounds on January 31, 2008, down 7.7 per cent from 482.5 million pounds on December 31, 2007, and down 5.4 per cent from 470.6 million pounds on January 31, 2007.

The United States' poultry stocks in cold storage totaled 1,116.1 million pounds on

January 31, 2008, up 10.8 per cent from 1,007.3 million pounds on December 31, 2007, and up 14.3 per cent from 976.6 million pounds on January 31, 2007.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.125 billion pounds on January 31, 2008, up 9.1 per cent from December 2007, and up 10.0 per cent from January 2007.This was the largest month-over-month increase since the December 2005 to January 2006 period. (Table #5) Pork had the largest volume increase since December, followed by turkey.

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

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have trended downward over the last two weeks after rebounding in February. Weekly U.S. hog slaughter numbers continue to be high, averaging 2.210 million head per week over the last four weeks, which is up over 10 per cent from a year ago. U.S. pork production has increased by about 11 per cent to average just over 450 million pounds per week over the last four weeks compared to the same period a year ago. While U.S. pork demand has been good, continued large increases in pork production has caught up with cold storage stocks. Pork in cold storage has increased by 104,911 pounds, or 22.9 per cent, from December to January, and is 16.4 per cent higher than January 2007.

The April, May, and June contracts had declined significantly at the end of February and into the first few days of March, before trending higher over the last week.  Continuing high United States hog slaughter numbers, increased pork production, increased pork in cold storage, and no sign of any significant reduction in North American pork production have contributed to the overall decline in future market prices.  (Table #6)

Table 6: 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 $120 to $128 per ckg in the second quarter, and average between $130 to $138 per ckg for the third quarter of 2008.

The Statistics Canada hog inventory numbers released in February showed a year-over-year 1.9 per cent decrease in the Canadian sow herd and a 6.5 per cent decrease in market herd. These numbers were lower than anticipated. However, the real extent of the sow liquidation probably won't be known until the second or third quarters of 2008, due to the depopulation process. The rate of North American sow liquidation and reduced pork production will be important in stimulating higher pork prices 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
Brad.Marceniuk@gov.sk.ca