October 8, 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 declined over the last two weeks, trading down from the US$72 to US$66 per cwt. range. The Iowa/Minnesota carcass price on Tuesday, October 7, averaged US$67.68 per cwt., which is equivalent to about C$157 per ckg. The price of Saskatchewan SPI Index 100 hogs on Tuesday, October 7, ranged from $129 to $139 per ckg. ($140 to $151 per ckg. for Index 109), with last week's price averaging $136.80 per ckg., up from the previous week's average of $134.20 per ckg, and up from $103.00 per ckg. for the same period a year ago.

United States Hog Production

The USDA's September 26, 2008, Quarterly Hogs and Pigs Report indicated that the total United States inventory of hogs and pigs on September 1, 2008, was 68.657 million head, up 1.4 per cent from 67.169 million head on June 1, 2008, and up 2.1 per cent from 67.279 million head on September 1, 2007.

The market hog inventory on September 1, 2008, was 62.607 million head, up 1.7 per cent from 61.591 million head on June 1, 2008, and up 2.5 per cent from 61.069 million head on September 1, 2007.

The total breeding inventory in the United States on September 1, 2008, was 6.049 million head, down 1.1 per cent from 6.119 million head on June 1, 2008, and down about 2.6 per cent from 6.209 million head on September 1, 2007.  The June and March breeding herd numbers were revised upward by less than one per cent from the June Hogs and Pigs Report.

Overall, the USDA's September hogs and pigs inventory report was close to the average trade estimates. While the U.S. breeding herd has declined, U.S. sow productivity has increased to 9.45 pigs per litter over the last two quarters (March to August 2008) from 9.25 pigs per litter over the same two quarters in 2007. The circo-virus vaccine introduced in 2007 has significantly reduced deaths, helping to increase U.S. hog production.  This has resulted in continued increases in U.S. hog production, which is expected to peak at 31 million hogs slaughtered in the fourth quarter, a new U.S. slaughter record.

The June to August 2008 U.S. pig crop was 29.251 million head, up 157,000 head or 0.5 per cent from the same quarter in 2007, and up 10.3 per cent from 2006. (Table#1) The U.S. pig crop over the last four quarters is up just over 5.9 million head or 5.4 per cent from the same four quarters a year ago.

Table 1: United States Quarterly Pig Crop

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

The number of sows farrowing during June to August 2008 was 3.076 million, down 1.8 per cent from 3.132 million head during June to August 2007, but up 5.6 per cent from 2.912 million head during June to August 2006. (Table#2) Actual farrowing numbers for the four quarters ending August 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 Quarterly Hogs and Pigs Report, September 2008

Farrowing intentions for the September-to-November 2008 period have been revised downward 1.5 per cent from the June report (3.052 million head), and are now estimated at 3.006 million head, down 5.5 per cent from 3.180 million head over the same period in 2007. Overall, farrowing numbers in the United States for the last two quarters are up slightly from 2007.  Increased farrowing numbers, combined with increased sow productivity, will mean more hog production into the fourth quarter and more pork production, depending on hog weights. Hog and pork production will probably not start to decline until the first quarter in 2009.   

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending October 4, 2008, was estimated at 2.323 million head, up 0.6 per cent from 2.310 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.245 million head per week, about 5.1 per cent higher than over the same period a year ago. (Table #3) Slaughter numbers over the last four weeks averaged 2.326 million head, up 3.4 per cent from 2.250 million head over the same period a year ago. Daily hog slaughter numbers over the last two weeks have averaged 433,000 head per day (week day). Pork production in the United States over the last eight weeks has averaged almost 440 million pounds per week, up 3.5 per cent from the same period in 2007. Pork production over the last four weeks was estimated to average just over 458 million pounds per week, up 1.8 per cent from 450 million pounds per week over the same period a year ago.

Table 3: United States Weekly Hog Slaughter

Source: USDA, Livestock Marketing Information Center

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending September 27, 2008, averaged 407,594 head, up slightly from 406,430 head for the seven weeks ending September 29, 2007.  Canadian hogs slaughtered over the last four weeks averaged 405,534 head, up slightly from 404,035 head over the same four weeks in 2007. In Canada, hogs slaughtered year-to-date ending September 27, 2008, totaled 15.730 million head, down slightly from the same period in 2007.  Increased hog slaughter numbers in Eastern Canada have helped keep Canadian slaughter numbers relatively flat overall.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending September 27, 2008, averaged 148,788 head, down 4.8 per cent from 156,345 head for the seven weeks ending September 29, 2007.  The number of hogs slaughtered over the last four weeks in Western Canada averaged 147,646 head, down 4.7 per cent from 154,989 head over the same period in 2007.  In Western Canada, hogs slaughtered year-to-date ending September 29, 2008, totaled 5.870 million head, down 5.0 per cent from 6.182 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 125,363 head per week over the seven weeks ending September 27, 2008, down 1.5 per cent or 1,844 head per week compared to 127,207 head per week over the seven weeks ending September 29, 2007. Year-to-date ending September 27, 2008, total weanling and feeder hog exports to the United States have totaled 5.257 million head, up 9.9 per cent from 4.782 million head over the same period in 2007.

Canadian slaughter weight hog exports to the United States averaged 37,141 head per week over the seven weeks ending September 27, 2008, down 43.7 per cent or 28,849 head per week from 65,990 head per week over the seven weeks ending September 29, 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 September 27, 2008, slaughter weight hog exports to the United States have totaled 1,878,064 head, down 16.9 per cent from 2,259,912 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 September 27, 2008, averaged 570,098 head per week, down 4.9 per cent from 599,627 head per week over the seven weeks ending September 29, 2007. The weekly declines are an indication of a contracting Canadian hog industry. Year-to-date ending September 27, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 22.865 million head, up slightly from 22.780 million head a year ago.  Year-to-date numbers are up slightly probably because of large hog liquidation numbers in the spring and early summer.

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

The pork cutout value (185 lb.) in the United States ended the week of October 4, 2008, averaging $73.44 per cwt., down $1.57 per cwt. or 2.1 per cent from $75.01 per cwt. the previous week, but up $12.47 per cwt. or 20.4 per cent from $60.97 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $69.91 per cwt., down $3.58 per cwt. or 4.9 per cent from $73.49 per cwt. the previous week, but up $21.21 per cwt. or 43.5 per cent from $48.70 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $90.27 per cwt., down $0.37 per cwt. or 0.4 per cent from $90.64 per cwt. the previous week, but up $14.18 per cwt. or 18.6 per cent from $76.09 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $82.46 per cwt., down $0.32 per cwt. or 0.4 per cent from $82.78 per cwt. the previous week, but up $9.13 per cwt. or 12.4 per cent from $73.33 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 482.8 million pounds on August 31, 2008, down 1.8 per cent from 491.4 million pounds on July 31, 2008, but up 5.3 per cent from 458.2 million pounds on August 31, 2007.  Most pork stocks have declined since July, except hams, butts and picnics. Year-over-year, individual pork stocks in cold storage are mostly up, except for hams.

The United States' beef stocks in cold storage totaled 434.0 million pounds on August 31, 2008, up 2.4 per cent from 423.9 million pounds on July 31, 2008, but down 9.8 per cent from 480.9 million pounds on August 31, 2007.

The United States' poultry stocks in cold storage totaled 1,382.9 million pounds on August 31, 2008, up 1.5 per cent from 1,362.0 million pounds on July 31, 2008, and up 16.7 per cent from 1,184.9 million pounds on August 31, 2007.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.300 billion pounds on August 31, 2008, up one per cent from 2.277 billion pounds on July 31, 2008, and up 8.3 per cent from August 31, 2007. (Table #5) Chicken had the largest volume increase, while pork had the largest volume decrease since July 31, 2008.

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

Source: NASS

Market Overview and Prices

North American cash hog prices (Iowa/Minn.) have declined over the last two weeks, dropping from just over $72 per cwt. to just over $66 per cwt. before closing at $67.68 per cwt. on Tuesday. Canadian cash hog prices have declined less, due to the further drop in the value of the Canadian dollar against the U.S. dollar.   Pork cutout values overall have declined over the last two weeks. Pork in cold storage has declined from July to August, but continues to be 5.3 per cent higher than a year ago.  U.S. weekly hog slaughter numbers over the last four weeks are up 3.4 per cent from the same period a year ago. While year-over-year increases in weekly average hog slaughter numbers are reduced, slaughter numbers are still higher. Daily hog slaughter numbers in the United States over the last two weeks have averaged about 433,000 head per day (week day). 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 31 million head slaughtered.

In their September quarterly Hogs and Pigs Report Summary, Glenn Grimes and Ron Plain of the University of Missouri commented that the demand index for pork at the consumer level in the United States was down 4.9 per cent from January to July 2008, compared to the same period in 2007.  However, the demand index for live hogs over the same period in 2008 was up 7.6 per cent, due to increased pork exports. Net pork exports as a percentage of U.S. production was 17.9 per cent for January to July 2008, up significantly from 9.2 per cent over the same period in 2007. Exports to China-Hong Kong were up 376 per cent for the first seven months of 2008, compared to the same period in 2007.  (Source: Grimes and Plain)

Grimes and Plain have estimated that the United States' commercial hog slaughter numbers would increase to 31.0 million head for the fourth quarter of 2008, before declining in 2009.  They estimated year-over-year slaughter numbers to decline to 29.0 million head in the first quarter and 26.5 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 (September 29, 2008)

The lean hog futures contracts have continued to decline over the last two weeks. Continued high U.S. hog slaughter numbers, combined with lower demand from weaker pork cutout values, have helped to push the lean hog futures contracts down. More uncertainty around U.S. pork exports into the fall and spring has been negative on futures prices.  The recent USDA Hogs and Pigs Report was bearish (negative) on lean hog futures prices.

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 $110 to $120 per ckg. in the fourth quarter of 2008, between $125 to $135 per ckg. in the first quarter of 2009 and between $150 to $160 per ckg. for the second quarter of 2009. These numbers are down from the previous month's estimates, primarily because of the significant drop in the lean hog futures contracts. The drop in the value of the Canadian dollar relative to the U.S. dollar had a positive impact on Canadian hog prices. Based on the current estimates of United States slaughter numbers for the fourth quarter, slaughter numbers could reach a new record high of 31 million head, which could put more downward pressure on hog prices.

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