August 2008

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

August 12, 2008

North American daily average hog prices (carcass - Iowa/Minn.) have increased significantly over the last three weeks, trading in the US$78 to US$88 per cwt. range. The Iowa/Minnesota carcass price on August 12 averaged US$85.95 per cwt., which is equivalent to just over C$191 per ckg. The price of Saskatchewan SPI Index 100 hogs on Tuesday, August 12, ranged from $168 to $178 per ckg. ($183 to $194 per ckg. for Index 109), with last week's price averaging $159.30 per ckg., up from the previous week's average of $150.00 per ckg. The recent price rebound in Canada, helped by the significant drop in the value of the Canadian dollar, has propelled Western Canadian hog producers back to near-break-even levels, the first time in over a year.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending August 9, 2008, was estimated at 2.128 million head, up 6.1 per cent from 2.005 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.072 million head per week, about 7.7 per cent higher than over the same period a year ago. (Table #1) Slaughter numbers over the last four weeks averaged 2.122 million head, up 7.3 per cent from 1.978 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.

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 August 2, 2008, averaged 389,792 head, flat from 389,392 head for the seven weeks ending August 4, 2007.  Canadian hogs slaughtered over the last three weeks averaged 405,330 head, flat from 405,240 head over the same three weeks in 2007. In Canada, hogs slaughtered year-to-date ending August 2, 2008, totaled 12.517 million head, down slightly from 12.526 million head over the same period in 2007.  

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending August 2, 2008, averaged 147,269 head, down 3.0 per cent from 151,798 head for the seven weeks ending August 4, 2007.  Slaughter hogs over the last three weeks in Western Canada have averaged 151,592 head, down 2.1 per cent from 154,910 head over the same period in 2007.  In Western Canada, hogs slaughtered year-to-date ending August 2, 2008, totaled 4.702 million head, down 5.2 per cent from 4.958 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 112,110 head per week over the seven weeks ending August 2, 2008, down 6.7 per cent or 8,098 head per week compared to 120,207 head per week over the seven weeks ending August 4, 2007. Year-to-date ending August 2, 2008, total weanling and feeder hog exports to the United States have totaled 4.247 million head, up 13.0

per cent from 3.757 million head over the same period in 2007. While weanling and feeder hog exports year-to-date are up, exports over the last seven weeks are down from 2007.

Canadian slaughter weight hog exports to the United States averaged 34,177 head per week over the seven weeks ending August 2, 2008, down 43.2 per cent or 25,991 head per week from 60,168 head per week over the seven weeks ending August 4, 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.  Year-to-date ending August 4, 2008, slaughter weight hog exports to the United States have totaled 1,581,242 head, down 9.0 per cent from 1,737,554 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 August 2, 2008, averaged 536,078 head per week, down 5.9 per cent from 569,767 head per week over the seven weeks ending August 4, 2007. The weekly declines are a clear indication of a contracting Canadian hog industry. Year-to-date ending August 2, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 18.345 million head, up 1.8 per cent from 18.021 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 August 9, 2008, averaging $90.56 per cwt., up $3.57 per cwt. or 4.1 per cent from $86.99 per cwt. the previous week, and up $19.71 per cwt. or 27.8 per cent from $70.85 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $88.56 per cwt., up $1.21 per cwt. or 1.4 per cent from $87.35 per cwt. the previous week, and up $27.93 per cwt. or 46.1 per cent from $60.63 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $108.20 per cwt., up $6.51 per cwt. or 6.4 per cent from $101.69 per cwt. the previous week, and up $19.66 per cwt. or 22.2 per cent from $88.54 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $99.65 per cwt., up $4.14 per cwt. or 4.3 per cent from $95.51 per cwt. the previous week, and up $15.91 per cwt. or 19.0 per cent from $83.74 per cwt. a year ago. Pork cutouts have increased significantly since the middle of July and are higher year-over-year.

(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 518.9 million pounds on June 30, 2008, down 8.5 per cent from 567.3 million pounds on May 31, 2008, but up 10.9 per cent from 467.9 million pounds on June 30, 2007.  Most pork stocks have declined since May. Year-over-year, pork stocks in cold storage are up, with bellies in cold storage leading the way higher at 59.7 per cent.

The United States' beef stocks in cold storage totaled 431.0 million pounds on June 30, 2008, up 4.2 per cent from 413.9 million pounds on May 31, 2008, but down slightly from 430.3 million pounds on June 30, 2007.

The United States' poultry stocks in cold storage totaled 1,333.1 million pounds on June 30, 2008, up 4.1 per cent from 1,280.0 million pounds on May 31, 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 2.283 billion pounds on June 30, 2008, up 1.0 per cent from May 31, 2008, and up 14.2 per cent from June 30, 2007. (Table #3) Turkey had the largest volume increase while pork had the largest decrease since May 31, 2008.

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

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have rebounded strongly over the last three weeks from $78 per cwt. to over $88 per cwt. The significant drop in the value of the Canadian dollar versus the United States dollar ($99.86 to $93.53 cents) over the last three weeks has also significantly increased Canadian hog prices in Canadian dollars. Pork cutout values have increased significantly over this period since mid-July. Pork in cold storage has declined from May to June but continues to be 10.9 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 7.3 per cent from the same period a year ago. With continued increases in productivity and fewer health issues, more hogs will be produced in the United States in 2008 than in 2007. Slaughter hog numbers are expected to reach a new United States record in the fourth quarter with over 31 million head slaughtered. While demand has been strong and has fueled a strong increase in hog prices, the continued increases in slaughter numbers in the fourth quarter are expected to push hog prices down.

The nearby lean hog futures contracts have improved over the last three weeks while the spring contracts starting in April 2009 have declined. Lower than expected sow liquidation in the United States reported from the June Hogs & Pigs Report has probably taken some of the air out of the higher spring lean hog futures prices. Strong short term demand for pork has improved the current market prices and nearby lean hog futures prices.

Table 4: 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 $135 to $145 per ckg. in the fourth quarter of 2008, and average between $145 to $155 per ckg. in the first quarter of 2009. This is up significantly from month ago estimates primarily because of the significant drop (six cents) in the value of the Canadian dollar versus the United States dollar, which has helped push Canadian hog prices upward. Further changes in the Canadian dollar can significantly change Canadian hog prices as we move into the fourth quarter.  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 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. 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 into the fourth quarter of 2008.

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