September 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.

Like many other commodities, North American daily average hog prices (carcass - Iowa/Minn.) have tumbled over the last three weeks, with averages trading down over the three weeks from the US$86 to US$68 per cwt. range. The Iowa/Minnesota carcass price on Friday September 5 averaged US$73.04 per cwt., which is equivalent to over C$162 per ckg. The price of Saskatchewan SPI Index 100 hogs on Friday, September 5, ranged from $133 to $143 per ckg. ($145 to $156 per ckg. for Index 109), with last week's price averaging $136.50 per ckg., down from the previous week's average of $146.80 per ckg.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending September 6, 2008, was estimated at 2.055 million head, up 6.4 per cent from 1.932 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.142 million head per week, about 7.1 per cent higher than over the same period a year ago. (Table #1) Slaughter numbers over the last four weeks averaged 2.162 million head, up 6.9 per cent from 2.023 million head over the same period a year ago. Daily hog slaughter numbers during the week have been at or over 430,000 head per day eight out of the nine days over the last two weeks. Pork production in the United States over the last four weeks was estimated to average 421 million pounds per week, up 5.4 per cent from almost 400 million pounds per week 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 six weeks ending August 23, 2008, averaged 402,308 head, up slightly from 400,054 head for the six weeks ending August 25, 2007.  Canadian hogs slaughtered over the last three weeks averaged 399,287 head, up 1.1 per cent from 394,869 head over the same three weeks in 2007. In Canada, hogs slaughtered year-to-date ending August 23, 2008, totaled 13.711 million head, unchanged from the same period in 2007.

In Western Canada, federal and provincial hog slaughter numbers for the six weeks ending August 23, 2008, averaged 148,113 head, down 2.3 per cent from 151,608 head for the six weeks ending August 25, 2007.  The number of hogs slaughtered over the last three weeks in Western Canada averaged 144,634 head, down 2.5 per cent from 148,306 head over the same period in 2007.  In Western Canada, hogs slaughtered year-to-date ending August 23, 2008, totaled 5.132 million head, down 5.0 per cent from 5.403 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 128,507 head per week over the six weeks ending August 23, 2008, up 5.1 per cent or 6,194 head per week compared to 122,314 head per week over the six weeks ending August 25, 2007. Year-to-date ending August 23, 2008, total weanling and feeder hog exports to the United States have totaled 4.636 million head, up 12.2 per cent from 4.133 million head over the same period in 2007. Weanling and feeder hog exports have rebounded since the end of July.

Canadian slaughter weight hog exports to the United States averaged 35,015 head per week over the six weeks ending August 23, 2008, down 41.7 per cent or 25,066 head per week from 60,081 head per week over the six weeks ending August 25, 2007.  Weekly slaughter hog exports since the beginning of April have declined from year ago numbers primarily because fewer hogs are being finished in Canada as sow liquidation continues.  Year-to-date ending August 23, 2008, slaughter weight hog exports to the United States have totaled 1,685,693 head, down 12.6 per cent from 1,929,640 head over the same period in 2007.

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the six-week period ending August 23, 2008, averaged 565,831 head per week, down 2.9 per cent from 582,449 head per week over the six weeks ending August 25, 2007. The weekly declines are an indication of a contracting Canadian hog industry. Year-to-date ending August 23, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 20.033 million head, up 1.3 per cent from 19.774 million head a year ago.

Canadian Hog Production

According to the August Statistics Canada hog inventory report, the total inventory of hogs in Canada on July 1, 2008, was 12.985 million head, down 11.6 per cent from 14.690 million head on July 1, 2007, and down slightly from 13.000 million head on April 1, 2008. Total Canadian hog inventory has declined since peaking at 15.205 million head on October 1, 2005, and is expected to decline further in 2008.

The Canadian market herd inventory on July 1, 2008, was estimated at 11.492 million head, down 12.4 per cent from 13.125 million head on July 1, 2007, and down slightly from 11.497 million head on April 1, 2008. In Western Canada, the market herd inventory on July 1, 2008, was 4.879 million head, down 13.9 per cent from 5.668 million head on July 1, 2007, but up 1.0 per cent from 4.832 million head on April 1, 2008.

The Canadian breeding herd, consisting of sows and bred gilts, was estimated at 1.462 million head on July 1, 2008, down 4.6 per cent from 1.532 million head on July 1, 2007, and down slightly from 1.472 million head on April 1, 2008.  In Western Canada, the breeding herd of sows and bred gilts was estimated at 670,100 head on July 1, 2008, down 4.2 per cent from 699,400 head on July 1, 2007, and down 1.2 per cent from 678,100 head on April 1, 2008. The Canadian breeding herd will continue to decline into the next quarter as the number of breeding animals claimed under the Federal Cull Breeding Swine Program was over 118,000 head as of August 1, 2008. With other barns not in the federal program taken out of production temporarily, the total culled numbers will be higher. The full extent of the number of sows culled may also not show in the data year-over-year as some operations in 2007 were converted to farrow-wean from farrow-finish.

According to Statistics Canada data, farrowing numbers for the first quarter of 2008 were 807,200 head (down 2.1 per cent year-over-year) and 801,700 head during the second quarter (down slightly year-over-year). Farrowing intentions for the third quarter of 2008 are estimated to be 800,800 head (up slightly) while farrowing intentions for the fourth quarter of 2008 are estimated at 803,600 head (down 3.0 per cent year-over-year). (Table #2) The number of pigs born in the first two quarters of 2008 were 17.312 million head, down 1.0 per cent from the first two quarters in 2007.   Overall, farrowing numbers and pig production are declining in 2008 with the biggest declines into the fourth quarter.

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

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

In Western Canada, farrowing numbers for the first two quarters of 2008 were 801,700 head, down 2.4 per cent from the first two quarters of 2007.  Farrowing intentions for the third quarter of 2008 are estimated to be 404,600 head (up 2.5 per cent from the third quarter in 2007) and 404,100 head in the fourth quarter of 2008 (down slightly from the fourth quarter in 2007).  (Table #3) The total number of pigs born in Western Canada in first two quarters of 2008 was 8,827,100 head, down 1.6 per cent from 8,973,600 head born in the first two quarters 2007, with the big decrease in the second quarter. 

Table 3: Sows Farrowing and Pigs Born, Western Canada

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

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

The pork cutout value (185 lb.) in the United States ended the week of September 6, 2008, averaging $77.76 per cwt., down $5.04 per cwt. or 6.1 per cent from $82.80 per cwt. the previous week, but up $9.59 per cwt. or 14.1 per cent from $68.17 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $72.82 per cwt., down $5.78 per cwt. or 7.3 per cent from $78.60 per cwt. the previous week, but up $14.27 per cwt. or 24.4 per cent from $58.55 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $97.11 per cwt., down $7.51 per cwt. or 7.2 per cent from $104.62 per cwt. the previous week, but up $13.06 per cwt. or 15.5 per cent from $84.05 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $77.34 per cwt., down $3.33 per cwt. or 4.1 per cent from $80.67 per cwt. the previous week, and down $6.37 per cwt. or 7.6 per cent from $83.71 per cwt. a year ago. Most pork cutouts have declined significantly over the last week except trimmings which were up.

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 492.2 million pounds on July 31, 2008, down 4.8 per cent from 517.2 million pounds on June 30, 2008, but up 8.0 per cent from 455.8 million pounds on July 31, 2007.  Most pork stocks have declined since June except hams and butts. Year-over-year, individual pork stocks in cold storage are mostly up, with bellies in cold storage leading the way higher at 87.1 per cent.

The United States' beef stocks in cold storage totaled 424.1 million pounds on July 31, 2008, up slightly from 421.2 million pounds on June 30, 2008, but down 9.3 per cent from 467.7 million pounds on July 31, 2007.

The United States' poultry stocks in cold storage totaled 1,368.2 million pounds on July 31, 2008, up 2.6 per cent from 1,333.2 million pounds on June 30, 2008, and up 16.1 per cent from 1,178.3 million pounds on July 31, 2007.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.284 billion pounds on July 31, 2008, up slightly from 2.272 billion pounds on June 30, 2008, and up 8.7 per cent from July 31, 2007. (Table #5) Turkey had the largest volume increase while pork had the largest decrease since June 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 tumbled over the last three weeks dropping to $68 per cwt. before closing at $73.04 per cwt. on Friday.  Pork cutout values have dropped significantly over the last three weeks. Pork in cold storage has declined from June to July but continues to be 8.0 per cent higher than a year ago.  U.S. weekly hog slaughter numbers over the last four weeks are up 6.9 per cent from the same period a year ago. Daily hog slaughter numbers in the United States over the last two weeks have been at or over 430,000 head per day (week day) eight out of the last nine days. 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.

The lean hog futures contracts have declined significantly between August and July. Continued high U.S. hog slaughter numbers, with lower demand from softer pork cutout values, have helped to push the lean hog futures contracts down. The announcement by Russia in late August that it would likely cut United States pork and poultry import quotas by hundreds of thousands of tons also had a negative effect on the lean hog futures contracts.  The announcement implied that these cuts could happen as early as the fourth quarter of 2008, which would reduce United States pork and poultry exports into Russia.

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 $120 to $130 per ckg. in the fourth quarter of 2008, and average between $140 to $150 per ckg. in the first quarter of 2009. This is down significantly from month ago estimates, primarily because of the significant drop in the lean hog futures contracts.  Based on the current estimates of United States slaughter numbers for the fourth quarter, slaughter numbers could reach a new record high of over 31 million head, 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 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, Hong Kong and Russia, will 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