April 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.
April 7, 2008

North American daily average hog prices (carcass - Iowa/Minn.) have improved somewhat since middle of March, but continue to be below the long-term average. The Iowa/Minnesota carcass price on April 7 averaged US $55.28 per cwt., which is equivalent to over $117 per ckg. (Cdn. $). The price of Saskatchewan SPI Index 100 hogs on Monday, April 7, ranged from $94 to $104 per ckg. ($102 to $113 per ckg. for Index 109), with last week's price averaging $100.20 per ckg., down from $124.20 per ckg the same week last year. Higher slaughter numbers and pork production, with increased U.S. pork in cold storage, have kept hog prices low.

United States Hog Production

The USDA's March 28, 2008, Quarterly Hogs and Pigs Report indicated that the total United States inventory of hogs and pigs on March 1, 2008, was 65.909 million head, down 1.6 per cent from 66.963 million head on December 1, 2007, but up 6.5 per cent from 61.860 million head on March 1, 2007. The December 1 and September 1, 2007, hog numbers were revised upward (2.9 and 2.2 per cent) from the December 2007 report.

The market hog inventory on March 1, 2008, was 59.770 million head, down 1.7 per cent from 60.801 million head on December 1, 2007, but up 7.2 per cent from 55.749 million head on March 1, 2007. The December 1, 2007, hog market inventory numbers were revised upward by 1,848,000 head (or 3.1 per cent), and the September 1, 2007, hog market inventory numbers were revised upward by 1,425,000 head (or 2.4 per cent), from the December 2007 Hogs and Pigs Report.  

The total breeding inventory in the United States on March 1, 2008, was 6.138 million head, down slightly from 6.161 million head on December 1, 2007, but up about 0.5 per cent from 6.110 million head on March 1, 2007.  The December and September 2007, breeding herd numbers were revised upward slightly from the December 2007 Hogs and Pigs Report.

Overall, the USDA's March Hogs and Pigs inventory report was more bearish than the average trade estimates with the breeding herd up 0.5 per cent compared to trade estimates of 0.2 per cent, and market inventory up 7.2 per cent compared to the trade estimate of 5.3 per cent, compared to March 1, 2007.

The December 2007 to February 2008 U.S. pig crop was 28.094 million head, up 1,698,000 head or 6.4 per cent from 2007, and up 9.5 per cent from 2006. (Table#1) The September to November 2007 pig crop numbers were revised 692,000 head upward or 2.5 per cent to 28.696 million head, while the June to August 2007 pig crop numbers were revised 1,229,000 head upward or 4.4 per cent from the December 2007 Hogs and Pigs Report. The U.S. pig crop over the last four quarters is up 7.2 million head or 6.8 per cent from the same four quarters a year ago. The circo-virus vaccine used in 2007 is believed to have significantly reduced deaths, helping to increase U.S. hog production.

Table 1: United States Quarterly Pig Crop

(1) December preceding year
Source: USDA Hogs and Pigs Report, March 2008

The number of sows farrowing during December 2007 to February 2008 was 3.051 million, up 5.0 per cent from 2.905 million head during December 2006 to February 2007, and up 7.4 per cent from 2.841 million head during December 2005 to November 2006. (Table#2) The September to November 2007 farrowing numbers were revised upward by 70,000 head or 2.3 per cent, while the June to August 2007 farrowing numbers were revised upward by 121,000 head or 4.0 per cent from the December 2007 Hogs and Pigs Report.  Actual farrowing numbers for the four quarters ending February 2008 were up 604,000 head or 5.2 per cent from the same period a year ago.

Table 2: United States Quarterly Sows Farrowing, and Intentions

 (1) December preceding year.
 (2) Farrowing Intentions.
Source: USDA Hogs and Pigs Report, March 2008

Farrowing intentions for the March to May 2008 period have been revised upward slightly from the December report (3.037 million head) and are now estimated at 3.047 million head, and up 4.1 per cent from 2.927 million head over the same period in 2006. Farrowing intentions for the June to August 2008 period are estimated at 3.037 million head, down 2.5 per cent from 3.114 million head over the same period a year ago  when farrowings peaked in 2007.   Overall, farrowing numbers in the United States for the first three quarters of 2008 are expected to be up from 2007, which means more hog production and, depending on hog weights, more pork production. 

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending April 5, 2008, was estimated at 2.286 million head, up 1.2 per cent from the previous week, and up 11.4 per cent from 2.052 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.246 million head per week, about 9.6 per cent higher than over the same period a year ago. (Table#3) Slaughter numbers over the last four weeks averaged 2.281 million head, up 8.9 per cent higher than over the same period a year ago. Total pork production over the last eight weeks was estimated to average almost 457 million pounds per week, up 10.1 per cent from 415 million pounds per week over the same time period a year ago. Pork production over the last four weeks averaged just over 463 million pounds per week, up 9.2 per cent over the same period a year ago. 

Table 3: 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 29, 2008, averaged 412,393 head, down 2.3 per cent from 422,271 head for the seven weeks ending March 31, 2007.  In Canada, hogs slaughtered year-to-date ending March 29, 2008, totaled 5.384 million head, down 1.1 per cent from 5.445 million head over the same period in 2007.  

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending March 29, 2008, averaged 155,029 head, down 8.5 per cent from 169,438 head for the seven weeks ending March 31, 2007.  In Western Canada, hogs slaughtered year-to-date ending March 29, 2008, totaled 2.001 million head, down 8.3 per cent from 2.183 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 149,353 head per week over the seven weeks ending March 29, 2008, up 21.6 per cent or 26,492 head per week compared to 122,861 head per week over the seven weeks ending March 31, 2007. Year-to-date ending March 29, 2008, total weanling and feeder hog exports to the United States have totaled 1.974 million head, up 27.0 per cent from 1.555 million head over the same period in 2007.  

Canadian slaughter weight hog exports to the United States averaged 58,078 head per week over the seven weeks ending March 29, 2008, up 8.0 per cent or 4,288 head per week from 53,790 head per week over the seven weeks ending March 31, 2007.  Year-to-date ending March 29, 2008, slaughter weight hog exports to the United States have totaled 889,295 head, up 25.3 per cent from 709,751 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 March 29, 2008, averaged 619,824 head per week, up 3.5 per cent from 598,922 head per week over the seven weeks ending March 31, 2007. Year-to-date ending March 29, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 8.247 million head, up 6.5 per cent from 7.710 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. We expect sow liquidation to increase substantially by the second or third quarter of 2008, as prices have not improved significantly.

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

The pork cutout value (185 lb.) in the United States ended the week of April 5, 2008, averaging $56.90 per cwt., up slightly from $56.50 per cwt. the previous week, but down $8.25 per cwt. or 12.7 per cent from $65.15 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $49.40 per cwt., up $3.97 per cwt. or 8.7 per cent from $45.43 per cwt. the previous week, and up $0.49 per cwt. or 1.0 per cent from $48.91 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $75.42 per cwt., up $1.00 per cwt. or 1.3 per cent from $74.42 per cwt. the previous week, but down $2.95 per cwt. or 3.8 per cent from $78.37 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $53.34 per cwt., down $7.05 per cwt. or 11.7 per cent from $60.39 per cwt. the previous week, and down $37.00 per cwt. or 41.0 per cent from $90.34 per cwt. a year ago. Cutouts for the week were mixed with hams up significantly and bellies down significantly. (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 603.2 million pounds on February 29, 2008, up 5.8 per cent from 570.3 million pounds on January 31, 2008, and up 24.8 per cent from 483.2 million pounds on February 28, 2007.  Most pork stocks have increased since January, the most notable being ribs (+15.4%), butts (+15.2%), and bellies (+12.4%).  Year-over-year, butts in cold storage are up 99.6 per cent, bellies are up 70.2 per cent and loins are up 30.2 per cent.

The United States' beef stocks in cold storage totaled 418.2 million pounds on February 29, 2008, down 6.0 per cent from 445.1 million pounds on January 31, 2008, and down 8.9 per cent from 458.9 million pounds on February 28, 2007.

The United States' poultry stocks in cold storage totaled 1,169.8 million pounds on February 29, 2008, up 5.8 per cent from 1,105.7 million pounds on January 31, 2008, and up 24.5 per cent from 939.6 million pounds on February 28, 2007.

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.191 billion pounds on February 29, 2008, up 3.3 per cent from January 31, 2008, and up 16.5 per cent from February 28, 2007. (Table #5) Turkey had the largest volume increase since January, followed by pork.

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

Source: NASS

Market Overview and Prices

North American cash hog prices (Iowa/Minn.) have improved somewhat over the last few weeks after dropping in early March. Pork in cold storage continues to increase since the big increase in January. Pork was 5.8 per cent higher in February than January 2008, and up almost 25 per cent from February 2007 to February 2008.  Weekly U.S. hog slaughter numbers continue to be high, and averaged 2.281 million head per week over the last four weeks, up 8.9 per cent from the same period a year ago. The March USDA Quarterly Hog and Pigs Report was very bearish, with upward revisions on total herd inventory, the June to November 2007 pig crop and June 2007 to May 2008 sow farrowing numbers and intentions. With continued increases in productivity and fewer health issues, more hogs will be produced in 2008 than in 2007.

In their March Quarterly Hogs and Pigs Report Summary, Glenn Grimes and Ron Plain of the University of Missouri commented that, from December 2007 to February 2008, the U.S. live hog demand index was up 8.2 per cent and the U.S. consumer demand for pork was up 5.0 per cent from the same period a year ago.  U.S. pork exports in January 2008 were the largest monthly total, up 26.6 per cent from a year ago.  Net pork export as a percentage of production has increased from 10.9 per cent in January 2007 to 13.0 per cent in January 2008.  (Source: Grimes and Plain)

With the upward revisions in the USDA Quarterly Hogs and Pigs Report, Grimes and Plain have raised their commercial hog slaughter numbers by 1,675,000 head to 29.610 million head for the first quarter of 2008.  Second quarter 2008 hog slaughter numbers were raised by 475,000 head to 27.300 million head, and third quarter 2008 hog slaughter numbers were raised by 1,000,000 head to 29.000 million head. Fourth quarter numbers increased slightly to 30.800 million head from earlier estimates in December.  (Table #6) Overall, Grimes and Plain increased slaughter number estimates for 2008 by 3.2 million head or 2.8 per cent from their earlier estimates. Slaughter numbers are now expected to increase by 7.5 million head or 6.9 per cent in 2008 from 2007, larger than the increase from 2006 to 2007. Grimes and Plain estimate that the U.S. will again have record slaughter numbers in 2008, with record numbers of almost 31 million head in the fourth quarter of 2008 which could test slaughter capacity and push hog prices into the low $30s-per-cwt. range in the fourth quarter. (Source: Grimes and Plain)

Table 6: United States Estimated Commercial Hog Slaughter  and Live Hog Prices, By Quarter

(p) Projections, (pe) Partial Estimate
Source: Glenn Grimes and Ron Plain,
University of Missouri - Columbia (March 31, 2008)

The nearby lean hog futures contracts had declined significantly at the end of March and into the first few days of April, before improving over the last few days.  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 from the March Quarterly Hogs and Pigs Report have contributed to the overall decline in future market prices.  (Table #7)

Table 7: 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 $118 to $123 per ckg in the second quarter of 2008, and average between $127 to $132 per ckg. for the third quarter of 2008. If significant sow liquidation does not occur and production is not reduced, these futures prices will probably be more on the optimistic side.

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