November 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 continued to decline over the last two weeks, trading down from the US$58.81 to US$53.43 per cwt. range. The Iowa/Minnesota carcass price on Tuesday, November 4, averaged US$53.43 per cwt., which is equivalent to about C$129 per ckg. The price of Saskatchewan SPI Index 100 hogs on Wednesday, November 5, ranged from $115 to $125 per ckg. ($125 to $136 per ckg. for Index 109), with the last two weeks' price averaging $132 per ckg., up from $97.50 per ckg. the same week a year ago.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending November 1, 2008, was estimated at 2.386 million head, up 2.9 per cent from 2.316 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.339 million head per week, up 2.2 per cent from 2.288 million head over the same period a year ago. (Table #1) Slaughter numbers over the last four weeks averaged 2.353 million head, up 1.2 per cent from 2.325 million head over the same period a year ago. Pork production in the United States over the last eight weeks has averaged just over 464 million pounds per week, up 0.9 per cent from the same period in 2007. Pork production over the last four weeks was estimated to average just over 470 million pounds per week, up slightly from the same period a year ago.  Hog slaughter and pork production continue to be higher year-over-year on average from 2007.

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 October 25, 2008, averaged 425,420 head, up 1.2 per cent from 420,202 head for the seven weeks ending October 27, 2007.  Canadian hogs slaughtered over the last four weeks averaged 426,429 head, up 2.5 per cent from 416,133 head over the same four weeks in 2007. In Canada, hogs slaughtered year-to-date ending October 25, 2008, totaled 17.413 million head, up slightly from the same period in 2007.  Increased hog slaughter numbers in Eastern Canada in 2008 have helped keep Canadian slaughter numbers relatively flat overall in 2008.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending October 25, 2008, averaged 158,550 head, down 1.4 per cent from 160,747 head for the seven weeks ending October 27, 2007.  The number of hogs slaughtered over the last four weeks in Western Canada averaged 162,889 head, up 2.3 per cent from 159,189 head over the same period in 2007.  Increased slaughter numbers over the last month at the Olymel plant in Red Deer and at the Maple Leaf plant in Brandon have helped increase Western Canadian hog slaughter numbers from the same period a year ago.  In Western Canada, hogs slaughtered year-to-date ending October 25, 2008, totaled 6.519 million head, down 4.4 per cent from 6.819 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 115,999 head per week over the seven weeks ending October 25, 2008, down 11.9 per cent or 15,669 head per week compared to 131,667 head per week over the seven weeks ending October 27, 2007. Year-to-date ending October 25, 2008, total weanling and feeder hog exports to the United States have totaled 5.717 million head, up 7.8 per cent from 5.305 million head over the same period in 2007.

Canadian slaughter weight hog exports to the United States averaged 33,425 head per week over the seven weeks ending October 25, 2008, down 53.0 per cent or 37,660 head per week from 71,085 head per week over the seven weeks ending October 27, 2007.  Year-to-date ending October 25, 2008, slaughter weight hog exports to the United States have totaled 1,996,137 head, down 22.0 per cent from 2,559,067 head over the same period in 2007.  Combined weekly slaughter and weanling/feeder hog exports over the last seven weeks have declined by 53,329 head or 26.3 per cent from the same period a year ago. A combination of uncertainty around the United States mandatory Country of Origin Labeling (COOL) - with some U.S. packers not accepting Canadian hogs in 2009 - and continued sow liquidation in Canada are the main reasons for the decline in live exports. 

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the seven-week period ending October 25, 2008, averaged 574,844 head per week, down 7.7 per cent from 622,954 head per week over the seven weeks ending October 27, 2007. The weekly declines are an indication of a contracting Canadian hog industry. Year-to-date ending October 25, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 25.126 million head, down 0.6 per cent from 25.266 million head a year ago.  

Canadian Hog Production

According to the October Statistics Canada hog inventory report, the total inventory of hogs in Canada on October 1, 2008, was 12.795 million head, down 10.9 per cent from 14.360 million head on October 1, 2007, and down 1.5 per cent from 12.985 million head on July 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 October 1, 2008, was estimated at 11.379 million head, down 11.2 per cent from 12.816 million head on October 1, 2007, and down 1.3 per cent from 11.535 million head on July 1, 2008. In Western Canada, the market herd inventory on October 1, 2008, was 4.769 million head, down 13.0 per cent from 5.484 million head on October 1, 2007, and down 1.2 per cent from 4.825 million head on July 1, 2008.

The Canadian breeding herd, consisting of sows and bred gilts, was estimated at 1.390 million head on October 1, 2008, down 8.1 per cent from 1.512 million head on October 1, 2007, and down 2.3 per cent from 1.422 million head on July 1, 2008.  In Western Canada, the breeding herd of sows and bred gilts was estimated at 632,100 head on October 1, 2008, down 8.5 per cent from 691,000 head on October 1, 2007, and down 2.2 per cent from 646,500 head on July 1, 2008. The Canadian breeding herd will continue to decline into the next quarter with continued financial losses and current uncertainty with exporting live hogs into the United States.

According to Statistics Canada data, farrowing numbers for the first three quarters of 2008 were 2,367,200 head, down 2.5 per cent from 2,428,300 head over the first three quarters in 2007. Farrowing intentions for the fourth quarter of 2008 are estimated to be 762,700 head, down 7.9 per cent from 828,200 head in the fourth quarter of 2007.

(Table #2) The number of pigs born in the first three quarters of 2008 were estimated at 25.467 million head, down 2.0 per cent from 25.982 million head during the first three quarters of 2007.  Overall, farrowing numbers and pig production are declining in 2008, with the biggest declines expected in the fourth quarter.

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

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

In Western Canada, farrowing numbers for the first three quarters of 2008 were 1,160,300 head, down 4.5 per cent from the first three quarters of 2007.  Farrowing intentions for the fourth quarter of 2008 are estimated to be 362,700 head, down 11.3 per cent from the fourth quarter in 2007. (Table #3) The total number of pigs born in Western Canada during the first three quarters of 2008 was 12,757,500 head, down 3.9 per cent from 13,272,700 head born during the first three quarters of 2007. 

Table 3: Sows Farrowing and Pigs Born, Western Canada

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

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

The pork cutout value (185 lb.) in the United States ended the week of November 1, 2008, averaging $63.49 per cwt., down $2.19 per cwt. or 3.31 per cent from $65.68 per cwt. the previous week, but up $5.86 per cwt. or 10.2 per cent from $57.63 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $50.18 per cwt., down $1.40 per cwt. or 2.7 per cent from $51.58 per cwt. the previous week, but up $5.37 per cwt. or 12.0 per cent from $44.81 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $86.07 per cwt., down $3.01 per cwt. or 3.4 per cent from $89.08 per cwt. the previous week, but up $12.70 per cwt. or 17.3 per cent from $73.37 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $69.77 per cwt., down $4.06 per cwt. or 5.5 per cent from $73.83 per cwt. the previous week, and up slightly from $69.67 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 507.3 million pounds on September 30, 2008, up 4.3 per cent from 486.6 million pounds on August 31, 2008, and up 4.6 per cent from 484.9 million pounds on September 30, 2007.  Ham and rib stocks have increased since August while bellies, loins, and picnics have declined. Year-over-year, individual pork stocks in cold storage are mostly up, except for hams and picnics.

The United States' beef stocks in cold storage totaled 444.5 million pounds on September 30, 2008, up 2.4 per cent from 434.0 million pounds on August 31, 2008, but down 8.7 per cent from 486.7 million pounds on September 30, 2007.

The United States' poultry stocks in cold storage totaled 1,375.8 million pounds on September 30, 2008, down 0.8 per cent from 1,386.9 million pounds on August 31, 2008, but up 18.0 per cent from 1,166.3 million pounds on September 30, 2007.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.328 billion pounds on September 30, 2008, up 0.9 per cent from 2.307 billion pounds on August 31, 2008, and up 8.9 per cent from September 30, 2007. (Table #5) Pork and beef had the largest volume increases, while chicken had the largest volume decreases since August 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 under $59 per cwt. to close at $53.43 per cwt. on Tuesday. While the declining value of Canadian dollar helped offset the decreases in North American cash hog prices for Canadian hog producers for most of October, the increase in the Canadian dollar over the last week has had a negative effect on Canadian hog prices.  Pork cutout values overall have declined over the last two weeks, and are down about 14 per cent from early October. Pork in cold storage has increased from August to September and continues to be 4.6 per cent higher than a year ago.  While year-over-year weekly hog slaughter numbers have fallen from their early highs, weekly hog slaughter numbers over the last four weeks have been 1.2 per cent higher than the same period a year ago. Daily hog slaughter numbers in the United States over the last two weeks have ranged from 429,000 to 436,000 head per day (week day), on the upper end of capacity. With continued increases in productivity and fewer health issues, more hogs will be produced in the United States in the fourth quarter of 2008 than in 2007.

The nearby lean hog futures contracts have trended lower over the last two weeks, while the spring/summer 2009 contracts have increased slightly. However, all contracts are down from early October. Continued high U.S. hog slaughter numbers, combined with lower demand from weaker pork cutout values, have helped to push the nearby lean hog futures contracts down. Increased meat in U.S. cold storage has also been negative on current 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 $105 to $115 per ckg. for the remaining period in the fourth quarter, average between $125 to $135 per ckg. for the first quarter of 2009, and average between $150 to $160 per ckg. for the second quarter of 2009. The rise in the value of the Canadian dollar versus the U.S. dollar over the last week was negative on Canadian cash hog prices and will be important in determining where Canadian hog prices go. United States hog slaughter numbers, on average, continue to be higher than year ago numbers, which will continue to put downward pressure on hog prices.

While we continue to see Canadian sow liquidation and declining Canadian hog production, until we start to see reduced hog slaughter in the United States we probably won't see any significant increases in North American hog prices. With U.S. mandatory COOL now in effect, we are seeing more uncertainty and supply flow problems between Canada and the United States. This will result in more price pressure on Canadian hog producers over the coming months, which could benefit Canadian packers. This could further hurt Canadian hog producers and force more sow liquidation.  Changes in weekly U.S. hog slaughter numbers over the coming months will be important in determining the market direction and pricing, particular if U.S. pork exports fall. The future value of the Canadian dollar will be important for Canadian hog prices and key for pork export markets.  The combination of COOL and the lower Canadian dollar may help increase Canadian pork exports and be negative for United States pork exports.

For more information contact the Livestock Development Branch:

Brad Marceniuk
Livestock Economist
933-5098
Brad.Marceniuk@gov.sk.ca