December 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 traded in a relatively narrow range over the last two weeks, trading in the US$52.54 to US$54.74 per cwt. range. The Iowa/Minnesota carcass price on Monday, December 8, averaged US$54.09 per cwt., which is equivalent to about C$142 per ckg. The price of Saskatchewan SPI Index 100 hogs on Tuesday, December 9, ranged from $123 to $125 per ckg. ($134 to $136 per ckg. for Index 109), with last week's price averaging $123.50 per ckg., up from $90.10 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 December 6, 2008, was estimated at 2.373 million head, down slightly from 2.376 million head over the same period in 2007.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.307 million head per week, down slightly from 2.311 million head over the same period a year ago. (Table #1) Slaughter numbers over the last four weeks averaged 2.280 million head, down 0.5 per cent from 2.291 million head over the same period a year ago. Pork production in the United States over the last eight weeks averaged just under 464 million pounds per week, down 1.2 per cent from the same period in 2007. Pork production over the last four weeks was estimated to average just over 459 million pounds per week, up 1.7 per cent from 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 seven weeks ending November 29, 2008, averaged 437,579 head, up 1.2 per cent from 432,200 head for the seven weeks ending December 1, 2007.  Canadian hogs slaughtered over the last four weeks averaged 449,479 head, up 5.0 per cent from 428,215 head over the same four weeks in 2007. In Canada, hogs slaughtered year-to-date ending November 29, 2008, totaled 19.653 million head, up 0.5 per cent from the same period in 2007.  Canadian hog slaughter numbers this fall are up primarily due to increased hog slaughter numbers in Western Canada. The drop in the value of the Canadian dollar versus the U.S. dollar over the last few months has helped Canadian hog slaughter/processors in the global markets.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending November 29, 2008, averaged 165,611 head, up 3.9 per cent from 159,470 head for the seven weeks ending December 1, 2007.  The number of hogs slaughtered over the last four weeks in Western Canada averaged 168,424 head, up 9.6 per cent from 153,656 head over the same period in 2007.  Increased hog slaughter numbers over the last few months at the Olymel plant in Red Deer and the Maple Leaf plant in Brandon have helped increase Western Canadian hog slaughter numbers this fall.  In Western Canada, hogs slaughtered year-to-date ending November 29, 2008, totaled 7.359 million head, down 3.2 per cent from 7.599 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 114,329 head per week over the seven weeks ending November 29, 2008, down 16.2 per cent or 22,062 head per week compared to 136,391 head per week over the seven weeks ending November 29, 2007. Year-to-date ending November 29, 2008, total weanling and feeder hog exports to the United States have totaled 6.295 million head, up 5.1 per cent from 5.991 million head over the same period in 2007.

Canadian slaughter weight hog exports to the United States averaged 29,600 head per week over the seven weeks ending November 29, 2008, down 62.9 per cent or 50,131 head per week from 79,731 head per week over the seven weeks ending December 1, 2007.  Year-to-date ending November 29, 2008, slaughter weight hog exports to the United States have totaled 2,149,142 head, down 27.7 per cent from 2,971,496 head over the same period in 2007.  Combined weekly slaughter and weanling/feeder hog exports over the last seven weeks have declined by 72,193 head or 33.4 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 November 29, 2008, averaged 581,508 head per week, down 10.3 per cent from 648,322 head per week over the seven weeks ending

December 1, 2007. The weekly declines are an indication of a contracting Canadian hog industry. Year-to-date ending November 29, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 28.097 million head, down 1.5 per cent from 28.512 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 December 6, 2008, averaging $60.41 per cwt., up $2.66 per cwt. or 4.6 per cent from $57.75 per cwt. the previous week, and up $1.52 per cwt. or 2.6 per cent from $58.89 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $55.38 per cwt., up $10.94 per cwt. or 24.6 per cent from $44.44 per cwt. the previous week, and up $4.19 per cwt. or 8.2 per cent from $51.19 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $72.19 per cwt., down $0.75 per cwt. or 1.0 per cent from $72.94 per cwt. the previous week, but up $4.83 per cwt. or 7.2 per cent from $67.36 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $74.06 per cwt., up $0.85 per cwt. or 1.2 per cent from $73.83 per cwt. the previous week, but down $2.42 per cwt. or 3.2 per cent from $76.48 per cwt. a year ago. (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 513.4 million pounds on October 31, 2008, up 1.1 per cent from 507.7 million pounds on September 30, 2008, and up 3.8 per cent from 494.7 million pounds on October 31, 2007.  Most stocks have increased since September, with rib and loin stocks leading the way, while hams have decreased. Year-over-year, individual pork stocks in cold storage are all up, except for variety meats.

The United States' beef stocks in cold storage totaled 463.0 million pounds on October 31, 2008, up 3.3 per cent from 448.1 million pounds on September 30, 2008, but down 5.1 per cent from 488.0 million pounds on October 31, 2007.

The United States' poultry stocks in cold storage totaled 1,357.6 million pounds on October 31, 2008, down 1.8 per cent from 1,382.4 million pounds on September 30, 2008, but up 21.5 per cent from 1,117.2 million pounds on October 31, 2007.  

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.334 billion pounds on October 31, 2008, down slightly from 2.338 billion pounds on September 30, 2008, but up 11.1 per cent from October 31, 2007. (Table #3) Chicken and beef had the largest volume increases, while turkey had the largest volume decreases since September 30, 2008.

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

Source: NASS

Market Overview and Prices

Last week, Statistics Canada released their updated Canadian grain production numbers for the 2008/09 crop. Non-durum wheat production was revised up by about 900,000 tonnes, while barley production was revised up by over 500,000 tonnes.  Global wheat production rebounded significantly in the 2008/09 year, with big gains in Canada, the U.S., the E.U., Ukraine and Russia.  Canadian barley exports are expected to be reduced from last year's record numbers, and the price spread between wheat and barley prices should encourage more wheat used globally for feed. Feed wheat and barley prices should be stable to lower in the short term. Informa Economics has projected that the 2008/09 year-ending Canadian non-durum wheat stocks are expected to be approximately three million tonnes higher, while Canadian barley stocks will be over 600,000 tonnes higher than a year ago.  (http://www.informaecon.com/)

North American cash hog prices (Iowa/Minn.) have traded in the mid $50's per cwt. to close at $54.09 per cwt. on Monday. While United States weekly hog slaughter numbers have leveled off over the last few weeks, and are down slightly from year-ago levels, they will need to continue declining into 2009 to improve hog prices. With a weaker global economy the demand for meat, including pork, could decline in the short term. Canadian hog production and breeding herd numbers continue to decline into the four quarter, and will face increased pressure from United States Country of Origin Labeling. The United States breeding herd will need to decline in 2009 to help reduce U.S. hog production and make an impact on North American hog and pork production. The USDA report later in December should help indicate if U.S. production and sow numbers are moving in the right direction. 

The lean hog futures contracts have trended lower since the end of November, after trending upward from early November. The weakness in the global economy and concern for global demand, along with continued high U.S. hog slaughter numbers, have helped to pressure lean hog futures contracts lower. While U.S. hog slaughter numbers have leveled off, they continue to be on the high side. While U.S. meat in cold has dropped slightly from September to October, year-over-year cold storage stocks continue to be 11.1 per cent higher than a year ago. The USDA report to be released at the end of December could have a big impact on the lean hogs futures contracts. (Table #4)

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. for the first quarter of 2009, and average between $160 to $170 per ckg. for the second quarter of 2009. The value of the Canadian dollar versus the U.S. dollar into 2009 will be important in determining where Canadian cash hog prices go.  Any significant variations from the current value of the Canadian dollar will significantly change Canadian hog prices. United States hog slaughter numbers will be more important as we move into 2009 since a weakening global economy could drag meat demand down.  

While we continue to see Canadian sow liquidation and declining Canadian hog production, United States hog production will need to be reduced in 2009 to significantly affect North American hog and pork supplies before hog prices can improve. 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 further hurt some 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 demand and exports fall. The future value of the Canadian dollar will be important for Canadian hog prices and key for pork export markets. 

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