January 2009

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.) over the last two weeks have traded in the US$49.19 to US$54.86 per cwt. range. The Iowa/Minnesota carcass price on Wednesday, January 7, averaged US$54.86 per cwt., which is equivalent to about C$137 per ckg. The price of Saskatchewan SPI Index 100 hogs on Wednesday, January 7, ranged from $109 to $119 per ckg. ($119 to $129 per ckg. for Index 109), with last week's price averaging $111.50 per ckg., down from the previous week's average of $112.20 per ckg, but up from the same period a year ago of $88.60 per ckg.

United States Hog Production

The USDA's December 30, 2008, Quarterly Hogs and Pigs Report indicated that the total United States inventory of hogs and pigs on December 1, 2008, was 66.708 million head, down 2.2 per cent from 68.196 million head on September 1, 2008, and down 2.1 per cent from 68.177 million head on December 1, 2007.

The market hog inventory on December 1, 2008, was 60.627 million head, down 2.4 per cent from 62.135 million head on September 1, 2008, and down 2.1 per cent from 61.944 million head on December 1, 2007. Pigs in the under sixty pounds category had the largest inventory decline, falling 1.248 million head or 5.5 per cent from a year ago.  

The total breeding inventory in the United States on December 1, 2008, was 6.081 million head, up slightly from 6.061 million head on September 1, 2008, but down about 2.4 per cent from 6.233 million head on December 1, 2007. 

USDA's December Hogs and Pigs inventory report was below average trade estimates for market hog inventory (down 2.2 percent vs. 0.7 percent estimate) but above average trade estimates for the breeding hog inventory (down 2.4 per cent vs. 3.4 per cent estimate). The total inventory of hogs and pigs was down 2.2 per cent versus the trade estimate of one per cent.

While the U.S. breeding herd has declined and sow farrowing numbers have been reduced over the last two quarters, U.S. sow productivity has increased which has limited production decreases.  Productivity increased from 9.28 to 9.51 pigs per litter (+2.5 per cent) for June to November 2008, from the same quarters in 2007.

The September to November 2008 U.S. pig crop was 28.410 million head, down 1.1 million head or 3.7 per cent from the same quarter in 2007, but up 5.8 per cent from 2006. (Table#1) The U.S. pig crop over the last four quarters is up 1.8 million head or 1.6 per cent while pig crops over the last two quarters is down almost 1.0 million head or 1.6 per cent from the same quarters in 2007.

Table 1: United States Quarterly Pig Crop

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

The number of sows farrowing during September to November 2008 was 2.990 million, down 6.0 per cent from 3.180 million head during September to November 2007, but up 1.4 per cent from the same quarter in 2006. (Table#2) Actual farrowing numbers for the four quarters ending November 2008 were down 57,000 head or 0.5 per cent, while farrowing numbers over the last two quarters were down 248,000 head or 3.9 per cent from the same period over 2007.

Table 2: United States Quarterly Sows Farrowing, and Intentions

(1) December preceding year.
(2) Farrowing Intentions.
Source: USDA Hogs and Pigs Report, December 2008

Farrowing intentions for the December to February 2009 period are estimated at 2.971 million head, down 3.3 per cent from 3.071 million head over the same period in 2007.  Farrowing intentions for the May to June 2009 period are estimated at 3.007 million head, down 1.6 per cent from 3.055 million head over the same quarter in 2007.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending January 3, 2009, was estimated at 1.918 million head, down 3.9 per cent from 1.996 million head over the same period a year ago.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.184 million head per week, down about 1.7 per cent from 2.221 million head over the same period a year ago. (Table #3) Slaughter numbers over the last four weeks averaged 2.093 million head, down 2.7 per cent from 2.152 million head over the same period a year ago. Pork production in the United States over the last eight weeks has averaged almost 443 million pounds per week, down almost five per cent from the same period a year ago.

United States Weekly Hog Slaughter

Source: USDA, LMIC

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the six weeks ending December 20, 2008, averaged 446,138 head, up 4.0 per cent from 429,152 head for the six weeks ending December 22, 2007.  In Canada, hogs slaughtered year-to-date ending December 20, 2008, totaled 20.962 million head, up 0.6 per cent from the same period in 2007.  Increased hog slaughter numbers in Western Canada over the last few months have helped increase slaughter hog numbers this fall. The drop in the value of the Canadian dollar versus the U.S. dollar has helped Canadian hog slaughter/processors be more competitive in the global markets.

In Western Canada, federal and provincial hog slaughter numbers for the six weeks ending December 20, 2008, averaged 166,410 head, up 6.1 per cent from 156,825 head for the six weeks ending December 22, 2007.  In Western Canada, hogs slaughtered year-to-date ending December 20, 2008, totaled 7.851 million head, down 2.8 per cent from 8.076 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 113,019 head per week over the six weeks ending December 20, 2008, down 24.8 per cent or 37,305 head per week compared to 150,324 head per week over the six weeks ending December 22, 2007. Year-to-date ending December 20, 2008, total weanling and feeder hog exports to the United States have totaled 6.618 million head, up 2.2 per cent from 6.477 million head over the same period in 2007.

Canadian slaughter weight hog exports to the United States averaged 30,493 head per week over the six weeks ending December 20, 2008, down 65.0 per cent or 56,722 head per week from 87,215 head per week over the six weeks ending December 22, 2007.  Year-to-date ending December 20, 2008, slaughter weight hog exports to the United States have totaled 2,243,421 head, down 30.7 per cent from 3,237,808 head over the same period in 2007.  Combined weekly slaughter and weanling/feeder hog exports over the last six weeks have declined by 94,026 head or 39.6 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 six-week period ending December 20, 2008, averaged 589,650 head per week, down 11.6 per cent from 666,691 head per week over the seven weeks ending

December 22, 2007. The weekly declines are an indication of a contracting Canadian hog industry. Year-to-date ending December 20, 2008, combined Canadian hog slaughter and total live hog exports to the United States totaled 29.823 million head, down 2.4 per cent from 30.551 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 January 3, 2009, averaging $54.85 per cwt., down $1.91 per cwt. or 3.4 per cent from $56.76 per cwt. the previous week, and down $2.03 per cwt. or 3.6 per cent from $56.88 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $34.32 per cwt., down $4.01 per cwt. or 10.5 per cent from $38.33 per cwt. the previous week, and down $3.95 per cwt. or 10.3 per cent from $38.27 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $77.50 per cwt., flat from $77.49 per cwt. the previous week, but up $3.00 per cwt. or 4.0 per cent from $74.50 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $69.96 per cwt., up $0.50 per cwt. or 0.7 per cent from $69.46 per cwt. the previous week, but down $2.29 per cwt. or 3.2 per cent from $72.25 per cwt. a year ago.

(Table #4) (Source: Livestock Marketing Information Center)

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 517.2 million pounds on

November 30, 2008, up 1.2 per cent from 510.8 million pounds on October 31, 2008, and up 9.0 per cent from 494.7 million pounds on October 31, 2007.  Most pork stocks have increased since October, except for hams and picnics, with the most significant increases in bellies and loins. Year-over-year, hams and ribs in cold storage have seen the most significant increase.

The United States' beef stocks in cold storage totaled 474.3 million pounds on

November 30, 2008, up 2.0 per cent from 465.1 million pounds on October 31, 2008, but down slightly from 475.3 million pounds on November 30, 2007.

The United States' poultry stocks in cold storage totaled 1,190.4 million pounds on November 30, 2008, down 13.0 per cent from 1,367.7 million pounds on October 31, 2008, but up 27.9 per cent from 930.7 million pounds on November 30, 2007. 

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.182 billion pounds on November 30, 2008, down 6.9 per cent from 2.344 billion pounds on October 31, 2008, but up 16.0 per cent from November 30, 2007. (Table #5) Turkey had the largest volume decrease since October 31, 2008, primarily due to United States Thanksgiving in November.

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

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have traded in a modest range over the last two weeks. After some increases over the last week, they closed at $54.86 per cwt. on Wednesday. Canadian cash hog prices have also being increasing over the last week. Pork cutout values overall have declined over the last two weeks, with ham taking the biggest pricing hit. Pork in cold storage has increased from October to November, and is 9.0 per cent higher than a year ago. While total meat in U.S. cold storage has dropped from October to November, meat supplies at the end of November were more than 300 million pounds or 16 per cent higher than a year ago. United States weekly hog slaughter numbers over the last four weeks were down 2.7 per cent, while slaughter numbers over the last eight weeks were down 1.7 per cent from the same period a year ago.

In their December 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 5.6 per cent from January to November 2008 compared to the same period in 2007. However, the demand index for live hogs over the same period in 2008 was up 6.2 per cent due to increased pork exports. Net pork exports as a percentage of U.S. production was 17.3 per cent for January to October 2008, up significantly from 9.3 per cent over the same period in 2007.  U.S. exports from January through October 2008 were up 60.7 per cent compared to the same period in 2007. Exports to China and Hong Kong were up 204 per cent over this period in 2008.  (Source: Grimes and Plain)

Grimes and Plain have estimated that United States' commercial hog slaughter numbers would decline to 28.8 million head in the first quarter (down 2.7 per cent) of 2009 and further decline to 26.3 million head (down 5.9 per cent) in the second quarter of 2009.

While they have estimated slaughter numbers to decline in 2009, they also anticipate U.S. pork exports to decline and U.S. pork imports to increase during the first half of 2009, which may keep domestic pork supplies similar to 2008 levels. Grimes and Plain have estimated that U.S. hog prices in 2009 to be similar to 2008 prices, with prices peaking in the third quarter. Based on their estimates of $73 - $78 ($U.S./cwt.) for the third quarter of 2009, that would equal about $180 - $192 per ckg in Canadian dollars (U.S. location) based on an 85-cent dollar. (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 (December 31, 2008)

The lean hog futures contracts have rebounded from mid-December since the latest USDA Hogs and Pigs Report. Futures prices have improved even with lower demand from weaker pork cutout values, as reduced pig crops and reduced live hog imports from Canada should help reduce slaughter numbers in the first half of 2009. 

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 $125 to $135 per ckg. for the first quarter of 2009, and average between $160 to $170 per ckg. for the second quarter of 2009. Canadian market hog prices are expected to increase more than U.S. hog prices primarily due to the decline in the value of the Canadian dollar versus the U.S. dollar over the last few months. Fluctuations in the value of the Canadian dollar versus the U.S. dollar over the coming months could change Canadian hog prices.

We expect the commodity markets will continue to be volatile over the coming months, reflecting changes in supply and demand estimates as U.S. slaughter numbers change. While we expect reductions in U.S. hog slaughter numbers during the first half of 2009, we also expect reductions in U.S. pork exports. Depending on where U.S. domestic pork supplies end up hog prices should increase in the first half of 2009, particularly around the end of the second quarter and start of the third quarter. Total meat production in the U.S. and continuing levels of cold storage stocks will be important for meat and pork pricing in general, particularly if a global recession slows U.S. exports. Changes in U.S. weekly hog slaughter numbers will continue to be important in determining market direction and pricing. The demand for meat will be a key factor influencing North American hog prices in 2009.

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