April 8, 2009

This information is provided as a resource by Saskatchewan Agriculture 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$55 to US$57 per cwt. range. This was a relatively narrow range compared to previous weeks. The Iowa/Minnesota carcass price on Tuesday, April 7, averaged US$55.32 per cwt., which is equivalent to over C$141 per ckg. The price of Saskatchewan SPI Index 100 hogs on Tuesday, April 7, ranged from $124 to $134 per ckg. ($135 to $146 per ckg. for Index 109). Saskatchewan SPI Index 100 prices averaged $131 ckg last week, up from $125 ckg from the previous week.

Source: SPI Marketing Group, LMIC

United States Hog Production

The USDA's March 27, 2009, Quarterly Hogs and Pigs Report indicated that the total United States inventory of hogs and pigs on March 1, 2009, was 65.389 million head, down 2.1 per cent from 66.768 million head on December 1, 2008, and down 2.7 per cent from 67.218 million head on March 1, 2008.

The market hog inventory on March 1, 2009, was 59.378 million head, down 2.2 per cent from 60.687 million head on December 1, 2008, and down 2.7 per cent from 61.018 million head on March 1, 2008. Pigs in the 60- to 119-pound category had the largest inventory decline from last quarter at one million head or 6.6 per cent.  Pigs in the under sixty pounds category had the largest inventory decline from a year ago declining 679,000 head or 3.1 per cent.  

The total breeding inventory in the United States on March 1, 2009, was 6.011 million head, down 1.1 per cent from 6.081 million head on December 1, 2008, and down about 3.0 per cent from 6.200 million head on March 1, 2008. 

USDA's March Hogs and Pigs Inventory Report was below average trade estimates for market hog inventory (down 2.7 percent vs. 3.2 percent estimate) but above average trade estimates for the breeding hog inventory (down 3.0 per cent vs. 2.1 per cent estimate). The total inventory of hogs and pigs was down 2.7 per cent versus the trade estimate of 3.1 per cent.

While the U.S. breeding herd has declined and sow farrowing numbers have been reduced over the last three quarters, U.S. sow productivity has increased, which has limited production decreases.  Productivity increased from 9.24 to 9.48 pigs per litter (+2.6 per cent) for December to February 2009, from the same quarter in 2008.

The December to February 2009 U.S. pig crop was 28.230 million head, down 157,000 head or 0.6 per cent from the same quarter in 2008, but up 7.0 per cent from 2007. (Table#1) The U.S. pig crop over the last two quarters is down almost 377,000 head or 0.7 per cent from the same quarters in 2008/09.

Table 1: United States Quarterly Pig Crop

(1) December preceding year

Source: USDA Hogs and Pigs Report, March 2009

The number of sows farrowing during December to February 2009 was 2.978 million head, down 3.0 per cent from 3.071 million head during December to February 2008, but up 2.5 per cent from the same quarter in 2007. (Table#2) Actual farrowing numbers for the two quarters from September 2008 to February 2009 were down 283,000 head or 4.5 per cent from the same period ending February 2008.

Table 2: United States Quarterly Sows Farrowing, and Intentions

(1) December preceding year.
(2) Farrowing Intentions.
Source: USDA Hogs and Pigs Report, March 2009

Farrowing intentions for the March to May 2009 period are estimated at 2.962 million head, down 3.0 per cent from 3.052 million head over the same period in 2008.  Farrowing intentions for the June to August 2009 period are estimated at 2.952 million head, down 4.0 per cent from 3.075 million head over the same quarter in 2008.  While farrowing intentions are estimated to be down between 3 to 4 per cent for the next two quarters, the pig crop will probably be down only one to two per cent if productivity continues to increase by two per cent and the less productive units are closed.    

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending April 4, 2009, was estimated at 2.164 million head, down 5.2 per cent from 2.284 million head over the same period a year ago.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.190 million head per week, down 2.5 per cent from 2.247 million head over the same period a year ago. (Table #3) Slaughter numbers over the last four weeks averaged 2.168 million head, down 5.0 per cent from 2.281 million head over the same period a year ago. U.S. hog slaughter numbers have declined significantly year-over-year over the last four weeks, primarily due to the large reduction in U.S. live hog imports of Canadian weanling, feeder, and slaughter weight hogs.   Pork production in the United States over the last eight weeks averaged almost 447 million pounds per week, down about 2.2 per cent from the same period a year ago, while pork production over the last four weeks averaged about 442 million pounds, down 4.7 per cent from the same period a year ago.  Hog prices have not reacted to these reduced numbers, primarily due to the large pork stocks in U.S. cold storage.

Table 3: United States Weekly Hog Slaughter

Source: USDA, LMIC

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending March 28, 2009, averaged 420,609 head, up 1.5 per cent from 414,541 head for the seven weeks ending March 22, 2008. In Canada, hogs slaughtered year-to-date ending

March 28, 2008, totaled 5.168 million head, up 4.0 per cent from the same period in 2008. Canadian hog slaughter numbers are expected to increase in 2009, as long as the value of the Canadian dollar versus the U.S. dollar remains low and global demand for pork remains strong.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending March 28, 2009, averaged 156,501 head, up 1.4 per cent from 154,351 head for the seven weeks ending March 22, 2008.  In Western Canada, hogs slaughtered year-to-date ending March 28, 2009, totaled 1.924 million head, up 4.8 per cent from 1.836 million head over the same period in 2008.

Canadian Live Hog Exports

Based on USDA APHIS data, Canadian weanling and feeder hog exports to the United States averaged 101,112 head per week over the six weeks ending March 21, 2009, down 35.1 per cent or 54,673 head per week compared to 155,785 head per week over the six weeks ending March 15, 2008.  Weekly weanling and feeder hog exports have rebounded over the last two weeks averaging 114,241 head per week, compared to averaging 96,177 head the previous eight weeks.  

Canadian slaughter weight hog exports to the United States averaged 20,521 head per week over the six weeks ending March 21, 2009, down 65.6 per cent or 39,182 head per week from 59,703 head per week over the six weeks ending March 15, 2008. Canadian live hog exports have declined significantly after peaking late in 2007 and early 2008.

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the six-week period ending March 21, 2008, averaged 543,703 head per week, down 14.6 per cent from 636,909 head per week over the six weeks ending March 15, 2008. The weekly declines are an indication of a contracting Canadian hog industry. Part of the decline may also be attributed to more Canadian weanling/feeder pigs kept home for finishing and slaughter.  The big question is how many? Depending on the data selection used for estimates, the decline in Canadian market numbers in 2009 could be at least eight per cent, and perhaps into the low teens.

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

The pork cutout value (185 lb.) in the United States ended the week of April 4, 2009, averaging $56.49 per cwt., down $2.14 per cwt. or 3.6 per cent from $58.63 per cwt. the previous week, and down $0.41 per cwt. or 0.7 per cent from $56.90 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $39.06 per cwt., down $7.12 per cwt. or 15.4 per cent from $46.18 per cwt. the previous week, and down $10.34 per cwt. or 20.9 per cent from $49.40 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $69.52 per cwt., virtually unchanged from $69.51 per cwt. the previous week, but down $5.90 per cwt. or 7.8 per cent from $75.42 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $75.27 per cwt., down $4.77 per cwt. or 6.0 per cent from $80.04 per cwt. the previous week, but up $21.93 per cwt. or 41.1 per cent from $53.34 per cwt. a year ago. Overall, cutouts have declined from a week ago.  (Table #4)

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 636.6 million pounds on February 28, 2009, up 4.9 per cent from 606.9 million pounds on January 31, 2009, and up 4.0 per cent from 611.8 million pounds on January 31, 2008.  Most pork stocks have increased since January, with the most significant increases occurring in bellies, butts and hams. Loins are the only pork stocks that have decreased since January.  Overall, total pork stocks are at the upper end of their storage level compared to the last five years.

The United States' beef stocks in cold storage totaled 434.2 million pounds on February 28, 2009, down 6.2 per cent from 462.6 million pounds on January 31, 2009, and down 0.5 per cent from 436.5 million pounds on February 28, 2008.

The United States' poultry stocks in cold storage totaled 1,121.0 million pounds on February 28, 2009, down 2.0 per cent from 1,144.0 million pounds on January 31, 2009, and down 5.2 per cent from 1,182.7 million pounds on February 28, 2008. 

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.192 billion pounds on February 28, 2009, down 1.0 per cent from 2.214 billion pounds on January 31, 2009, and down 1.8 per cent from 2.231 billion pounds on February 28, 2008. (Table #5)

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

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have fluctuated in a narrow range over the last two weeks. Prices have increased slightly over the last week after declining in early March. Pork cutout values overall have declined over the last two weeks, with hams taking the biggest hit. Pork in cold storage has increased by 4.9 per cent from January to February, and is 4.0 per cent higher than a year ago. Total meat in U.S. cold storage has decreased by one per cent from January to February, and total meat supplies are 39 million pounds, or 1.8 per cent lower than a year ago. Total meat supplies in the United States have declined but continue to be at the upper end of cold storage numbers compared to the last five years. United States weekly hog slaughter numbers over the last four weeks were down 5.0 per cent, while slaughter numbers over the last eight weeks were down 2.5 per cent from the same period a year ago. Slaughter number should continue to be below last year numbers with a smaller U.S. pig crop and reduced U.S. live hog imports from Canada.  Reduced hog slaughter numbers and continued strong demand will be needed to help bring down U.S. pork in cold storage. U.S. pork exports in 2009 will have to remain strong to keep domestic pork supplies from increasing.

In their March 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 up 1.6 per cent from December to February 2009 compared to the same period a year ago.  U.S. exports were down 8.7 per cent in January 2009, compared to January 2008. Exports were down 90.1 per cent to mainland China and 75.0 per cent to Russia in January 2009 compared to January 2008. (Source: Grimes and Plain)

Grimes and Plain have estimated that United States' commercial hog slaughter numbers would decline to 26.7 million head in the second quarter (down 4.4 per cent) of 2009 and decline to 27.3 million head (down 5.0 per cent) in the third quarter of 2009.  While they have predicted slaughter numbers in the next two quarters to decline from 2008, Grimes and Plain have estimated that U.S. hog prices in these two quarters would be lower than the same quarters in 2008, primarily due to lower U.S. pork exports. Based on their estimates hog prices should peak at $70 - $75 ($U.S./cwt.) in the third quarter of 2009, which would equal about $176 - $189 per ckg in Canadian dollars (U.S. location) based on an 82-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 (March 30, 2009)

The nearby (May to July) lean hog futures contracts have increased over the last week but continue to be below prices from mid-February. While U.S. hog slaughter numbers have declined over the last few weeks, pork in cold storage has increased from January to February and pork cutout values have declined, not providing a large enough stimulus for a large rebound in lean hog futures prices. (Table #7)

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 $155 to $160 per ckg. in the second quarter of 2009 and average between $150 to $155 per ckg. in the third quarter of 2009.  With overall lean hog future prices down from a month ago and the value of the Canadian dollar increasing by two to three cents from a month ago, Canadian hog price projections are lower than a month ago. Canadian slaughter weight hog prices are expected to increase more than U.S. hog prices in 2009, primarily due to the decline in the value of the Canadian dollar versus the U.S. dollar since 2008.

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. 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. meat exports. Changes in U.S. weekly hog slaughter numbers will continue to be important in determining market direction and pricing. The global demand for pork, including U.S. pork exports, will be a key factor influencing North American hog prices in the spring/summer of 2009.

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