July 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 weakening over the last month, trading in the US$69 to US$75 per cwt. range. The Iowa/Minnesota carcass price on July 7 averaged US$69.37 per cwt., which is equivalent to C$148 per ckg. The price of Saskatchewan SPI Index 100 hogs on Monday, July 7, ranged from $126 to $136 per ckg. ($137 to $148 per ckg. for Index 109), with last week's price averaging $132.65 per ckg., down from the previous week's average of $137.50 per ckg.

United States Hog Production

The USDA's June 27, 2008, Quarterly Hogs and Pigs Report indicated that the total United States inventory of hogs and pigs on June 1, 2008, was 67.661 million head, up 0.7 per cent from 67.169 million head on March 1, 2008, and up 5.8 per cent from 63.951 million head on June 1, 2007. The March 1, 2008, and December 1, 2007, hog numbers were revised upward (1.9 and 1.7 per cent) from the March 2008 report.

The market hog inventory on June 1, 2008, was 61.595 million head, up 0.9 per cent from 61.030 million head on March 1, 2008, and up 6.5 per cent from 57.830 million head on June 1, 2007. The March 1, 2008, hog market inventory numbers were revised upward by 1,260,000 head (or 2.1 per cent), and the December 1, 2007, hog market inventory numbers were revised upward by 1,150,000 head (or 1.9 per cent), from the March Hogs and Pigs Report.  

The total breeding inventory in the United States on June 1, 2008, was 6.069 million head, down 1.1 per cent from 6.138 million head on March 1, 2008, and down about 0.8 per cent from 6.120 million head on June 1, 2007.  The March and December breeding herd numbers were left unchanged from the March 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 down 0.8 per cent compared to trade estimates of 1.4 per cent, and market inventory up 6.5 per cent compared to the trade estimate of 5.1 per cent, compared to June 1, 2007.

The March to May 2008 U.S. pig crop was 29.000 million head, up 1,100,000 head or 4.0 per cent from 2007, and up 9.1 per cent from 2006. (Table#1) The December to February 2008 pig crop numbers were revised 258,000 head upward or 0.9 per cent to 28.352 million head, while the September to November 2007 pig crop numbers were revised 821,000 head upward or 2.9 per cent from the March Hogs and Pigs Report. The U.S. pig crop over the last four quarters is up just over 8.3 million head or 7.7 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, June 2008

The number of sows farrowing during March to May 2008 was 3.092 million, up 2.0 per cent from 3.033 million head during March to May 2007, and up 5.6 per cent from 2.927 million head during March to May 2006. (Table#2) The December 2007 to February 2008 farrowing numbers were revised upward by 16,000 head or 0.5 per cent, while the September to November 2007 farrowing numbers were revised upward by 81,000 head or 2.6 per cent from the March Hogs and Pigs Report.  Actual farrowing numbers for the four quarters ending May 2008 were up 672,000 head or 5.7 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, June 2008

Farrowing intentions for the June to August 2008 period have been revised upward 1.1 per cent from the March report (3.037 million head), and are now estimated at 3.070 million head, down 2.0 per cent from 3.132 million head over the same period in 2007. Farrowing intentions for the September to November 2008 period are estimated at 3.052 million head, down 4.0 per cent from 3.180 million head over the same period a year ago when farrowings peaked in 2007.   Overall, farrowing numbers in the United States for the first two quarters of 2008 are 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 July 5, 2008, was estimated at 1.702 million head, up 3.4 per cent from 1.646 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.002 million head per week, about 6.5 per cent higher than over the same period a year ago. (Table #3) Slaughter numbers over the last four weeks averaged 1.979 million head, up 6.2 per cent from 1.864 million head over the same period a year ago. While slaughter numbers are up from a year ago, they are down from the weekly highs in April. Total pork production over the last eight weeks was estimated to average about 402 million pounds per week, up 7.0 per cent from 376 million pounds per week over the same time period a year ago. Pork production over the last four weeks averaged 398 million pounds per week, up 7.3 per cent from 371 million pounds per week 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 June 28, 2008, averaged 384,906 head, up slightly from 384,792 head for the seven weeks ending June 30, 2007.  In Canada, hogs slaughtered year-to-date ending June 28, 2008, totaled 10.559 million head, down slightly from 10.566 million head over the same period in 2007.  

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending June 28, 2008, averaged 146,652 head, down 2.5 per cent from 150,436 head for the seven weeks ending June 30, 2007.  In Western Canada, hogs slaughtered year-to-date ending June 28, 2008, totaled 3.966 million head, down 5.7 per cent from 4.205 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 126,165 head per week over the seven weeks ending June 28, 2008, up 4.3 per cent or 5,226 head per week compared to 120,939 head per week over the seven weeks ending June 30, 2007. Year-to-date ending June 30, 2008, total weanling and feeder hog exports to the United States have totaled 3.693 million head, up 16.9 per cent from 3.159 million head over the same period in 2007. While weanling and feeder hog exports over the last few weeks are still up, they are down from early in 2008.

Canadian slaughter weight hog exports to the United States averaged 36,519 head per week over the seven weeks ending June 28, 2008, down 39.2 per cent or 23,577 head per week from 60,096 head per week over the seven weeks ending June 30, 2007.  Weekly slaughter hog exports since the beginning of April have declined from year ago numbers primarily because less hogs are being finished in Canada as sow liquidation continues, and more weanling pigs are being exported to the United States. Year-to-date ending June 28, 2008, slaughter weight hog exports to the United States have totaled 1,410,000 head, down 2.25 per cent from 1,442,242 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 June 28, 2008, averaged 547,590 head per week, down 3.2 per cent from 565,827 head per week over the seven weeks ending June 30, 2007. Year-to-date ending June 28, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 15.662 million head, up 3.3 per cent from 15.168 million head a year ago.

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

The pork cutout value (185 lb.) in the United States ended the week of July 5, 2008, averaging $79.12 per cwt., down 0.8 per cent from $79.77 per cwt. the previous week, but up $7.47 per cwt. or 10.4 per cent from $71.65 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $71.24 per cwt., down $1.47 per cwt. or 2.0 per cent from $72.71 per cwt. the previous week, but up $15.47 per cwt. or 27.7 per cent from $55.77 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $96.84 per cwt., up slightly from $96.55 per cwt. the previous week, and up $11.11 per cwt. or 13.0 per cent from $85.73 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $83.39 per cwt., up $1.61 per cwt. or 2.0 per cent from $81.79 per cwt. the previous week, but down $14.91 per cwt. or 15.2 per cent from $98.30 per cwt. a year ago. (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 567.6 million pounds on May 31, 2008, down 13.0 per cent from 652.6 million pounds on April 30, 2008, but up 15.4 per cent from 492.0 million pounds on May 31, 2007.  Most pork stocks have declined since April except hams, which have increased by 5.5 per cent. Year-over-year, pork stocks in cold storage are up, with bellies in cold storage leading the way at 52.5 per cent.

The United States' beef stocks in cold storage totaled 427.5 million pounds on May 31, 2008, down slightly from 430.0 million pounds on April 30, 2008, but up 3.9 per cent from 411.5 million pounds on May 31, 2007.

The United States' poultry stocks in cold storage totaled 1,273.3 million pounds on May 31, 2008, up 2.1 per cent from 1,247.5 million pounds on April 30, 2008, and up 25.1 per cent from 1,017.8 million pounds on May 31, 2007.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.268 billion pounds on May 31, 2008, down 2.6 per cent from April 30, 2008, but up 18.1 per cent from May 31, 2007. (Table #5) Turkey had the largest volume increase while pork had the largest decrease since April 30, 2008.

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

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have weakened over the last few weeks. Pork in cold storage has declined from April to May but continues to be 15.4 per cent higher than a year ago.  While U.S. weekly hog slaughter numbers have declined from their highs in March and early April, U.S. hog slaughter numbers over the last four weeks are still up 6.2 per cent from the same period a year ago. The June USDA Quarterly Hog and Pigs Report was bearish, with upward revisions on total herd inventory, pig crop and sow farrowing numbers. While farrowing intentions for the June to August 2008 period were revised upward from the March report, they are estimated to be 2.0 per cent lower than over the same period in 2007. With continued increases in productivity and fewer health issues, more hogs will be produced in 2008 than in 2007.

In their June Quarterly Hogs and Pigs Report Summary, Glenn Grimes and Ron Plain of the University of Missouri commented that "demand continues to be a bright spot for the hog industry," as the demand index in the United States from January to May 2008, was up between six to eight per cent for live hogs, and up 1.2 per cent for pork at the consumer level, from the same period in 2007.  U.S. pork exports in April were up almost 96 per cent from a year ago, while pork exports from January to April 2008 were up 52 per cent from the same period in 2007.  Net pork exports as a percentage of production from January to April 2008, were 15.6 per cent, up 0.7 per cent from the same period in 2007.  (Source: Grimes and Plain)

Grimes and Plain have estimated that United States' commercial hog slaughter numbers would increase to 31.2 million head for the fourth quarter of 2008, before declining in 2009.  They estimated year-over-year slaughter numbers to decline to 29.3 million head in the first quarter and 27.1 million head for the second quarter of 2009. (Table #6) (Source: Grimes and Plain)

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

(p) Projections, (pe) Partial Estimate
Source: Glenn Grimes and Ron Plain,
University of Missouri - Columbia (June 30, 2008)

The nearby lean hog futures contracts have declined over the last couple of days, primarily due to the bearish USDA report. However, lean hog futures contracts for April to June 2009 have actually increased over the last two weeks. Higher corn prices could force more sow liquidation. (Table #7)  Based on the supply of hogs projected to be slaughtered in the United States in the fourth quarter of 2008 and early 2009, many Economists feel these lean hog futures prices may be too optimistic.

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 $120 to $125 per ckg. over the third and fourth quarters in 2008.  Based on the current estimates of United States slaughter numbers for the fourth quarter, slaughter numbers could reach over 31 million head, a new record which could put significant downward pressure on hog prices. While demand has been strong over the last year, increased hog supplies could test slaughter capacity. We could see hog prices well below the fourth quarter lean hog futures prices.

The rate of North American sow liquidation and reduced pork production will be important in maintaining pork prices in 2008. The next Statistics Canada report will further provide insight in determining the amount of sow liquidation in Canada, which will reflect on future live hog exports to the United States. 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