June 9, 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.) have been particularly weak over the last two weeks when seasonal prices are typically high. Continued high North American pork production combined with anticipated weaker pork exports are probably the main reason for these softer prices. The Iowa/Minnesota carcass price on Tuesday, June 9, averaged US$54.55 per cwt., which is equivalent to over C$124 per ckg. The price of Saskatchewan SPI Index 100 hogs on Tuesday, June 9, ranged from $109 to $119 per ckg., with last weeks weekly pool price of $116.30 per ckg..

Source: SPI Marketing Group, LMIC

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the United States for the week ending June 6, 2009, was estimated at 2.100 million head, down slightly from 2.107 million head over the same period a year ago.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.045 million head per week, down 3.2 per cent from 2.112 million head over the same period a year ago. (Table #1) Slaughter numbers over the last four weeks averaged 2.009 million head, down 0.74 per cent from 2.024 million head over the same period a year ago.

Table 1: United States Weekly Hog Slaughter

Source: USDA, LMIC

Pork production in the United States over the last eight weeks averaged an estimated 417 million pounds per week, down about 1.6 per cent from the same period a year ago, while pork production over the last four weeks averaged about 410 million lb., up about 1.0 per cent from the same period a year ago. While U.S. hog slaughter numbers continue to be below year ago numbers, greater hog weights have actually increased pork production over the last four weeks from the same period in 2008. 

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending May 30, 2009, averaged 395,196 head, down 1.9 per cent from 402,784 head for the seven weeks ending May 24, 2008. In Canada, hogs slaughtered year-to-date ending May 30, 2009, totaled 8.728 million head, up 1.1 per cent from the same period in 2008.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending May 30, 2009, averaged 154,140 head, up 0.5 per cent from 153,402 head for the seven weeks ending May 24, 2008.  In Western Canada, hogs slaughtered year-to-date ending May 30, 2009, totaled 3.290 million head, up 1.6 per cent from 3.239 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 102,659 head per week over the six weeks ending May 23, 2009, down 25.9 per cent or 35,943 head per week compared to 138,602 head per week over the six weeks ending May 17, 2008.  Weekly weanling and feeder hog exports had rebounded to over 100,000 head per week, but since have declined below 100,000 head per week over the last three weeks. Weanling/feeder hog export numbers have declined significantly (50,000-60,000 head per week) after peaking early in 2008 at 150,000-160,000 hogs per week.

Canadian slaughter weight hog exports to the United States averaged 19,507 head per week over the six weeks ending May 23, 2009, down 52.6 per cent or 21,669 head per week from 41,176 head per week over the six weeks ending May 17, 2008.  Slaughter hog export numbers have declined significantly (60,000-70,000 head per week) after peaking at 80-90,000 hogs per week late in 2007.  COOL has been a very big factor in reduced live hog exports to the United States.

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the six-week period ending May 23, 2009, averaged 514,156 head per week, down 13.2 per cent from 592,699 head per week over the six weeks ending May 17, 2008. The weekly declines are a reminder of our contracting Canadian hog industry.

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

The pork cutout value (185 lb.) in the United States ended the week of June 6, 2009, averaging $56.46 per cwt., down $3.13 per cwt. or 5.3 per cent from $59.59 per cwt. the previous week, and down $21.43 per cwt. or 27.5 per cent from $77.89 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $42.62 per cwt., up $1.35 per cwt. or 3.3 per cent from $41.27 per cwt. the previous week, but down $28.70 per cwt. or 40.2 per cent from $71.32 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $73.85 per cwt., down $6.05 or 7.6 per cent from $79.90 per cwt. the previous week, and down $22.71 per cwt. or 23.5 per cent from $96.56 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $67.79 per cwt., down $8.15 per cwt. or 10.7 per cent from $75.94 per cwt. the previous week, and down $13.98 per cwt. or 17.1 per cent from $81.77 per cwt. a year ago. (Table #2)

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 614.7 million lb. on April 30, 2009, up 3.5 per cent from 594.1 million pounds on March 31, 2009, but down 7.3 per cent from 663.4 million lb. on April 30, 2008.  Pork stocks have increased since March with the most significant increases occurring in hams, bellies, and trimmings. Overall, total pork stocks in cold storage are still above their five-year average.

The United States' beef stocks in cold storage totaled 410.9 million lb. on April 30, 2009, down 3.5 per cent from 425.9 million lb. on March 31, 2009, and down 1.3 per cent from 416.3 million lb. on April 30, 2008.

The United States' poultry stocks in cold storage totaled 1,246.1 million lb. on April 30, 2009, up 8.1 per cent from 1,153.1 million lb. on March 31, 2009, but down slightly from 1,247.5 million lb. on April 30, 2008. 

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.272 billion lb. on April 30, 2009, up 4.5 per cent from 2.173 billion lb. on March 31, 2009, but down 2.4 per cent from 2.327 billion lb. on April 30, 2008.  

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

Source: NASS

Market Overview and Prices

North American cash hog prices (Iowa/Minn.) are weak during a period when prices are typically the strongest. Pork cutout values continue to be weak, below US$57 per cwt., well below year-ago prices in the US$80-per-cwt. range. While year-over-year U.S. hog slaughter numbers had declined four to five per cent towards the end of March and in April, these spreads have narrowed in recent weeks. Also, hog weights have increased over the last few weeks which actually increased U.S. pork production by almost one

per cent over the last four weeks, compared to the same period a year ago. Pork in cold storage has increased by 3.5 per cent from March to April, but is 7.3 per cent lower than a year ago. Total meat in U.S. cold storage has increased by 4.5 per cent or 98 million lb. from March to April, while total meat supplies are 55 million lb., or 2.4 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. The magnitude and duration of the bans on North American pork will determine where cold storage stocks move in the coming months. While North American, particularly U.S. pork exports were decent the first few months of 2009, we question where they are today. Without current data available we can only speculate that North American pork exports are down with weaker global demand and current bans on North American pork by several important countries.

June to October lean hog futures contracts have declined significantly since the end of April. Futures prices are indicating weak summer hog prices. We can only hope that futures prices have over shot on the down side. Lean hog futures prices have been volatile over the last month with the H1N1 outbreak and concerns over global pork demand.  (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 $115 to $125 per ckg. for the third and fourth quarters of 2009. We hope the futures prices are low and Canadian hog prices end up significantly higher. With lean hog futures prices down from a month ago and the value of the Canadian dollar increasing significantly to over 90 cents, Canadian hog price projections are lower than a month ago. The rapid increase in the value of the Canadian dollar from low $80 at the beginning of May to low $90 early in June has significantly impacted Canadian hog prices.  Canadian hog producers are dealing with some big challenges stemming from COOL, the H1N1 flu virus, and the recent rally in the Canadian dollar.  We hope hog producers took some precautionary measures early in 2009 and did some risk management, hedging some of their hog prices. The Canadian hog industry will continue to downsize with the current losses producers are facing.

Commodity markets will continue to fluctuate over the coming months, reflecting changes in supply and demand estimates. We expect continued reductions in overall North American hog production and slaughter numbers over the coming months.  North American pork exports are more important than ever with increased pork production over the last few years. North American (Canada and U.S.) consumption of domestic pork production has declined from about 93 per cent in 1998 to about 78 per cent in 2008. Like in 2008, a surge in pork exports this summer would help improve hog prices.   The global demand for pork and the magnitude and duration of the current bans on North American pork will be crucial in determining price direction in the coming months. 

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