July 6, 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.) continue to be weak at a time when seasonal prices are typically high. Continued high North American pork production, combined with weaker pork exports, are the main reasons for these weaker prices. The Iowa/Minnesota carcass price on Monday, July 6, averaged US$57.93 per cwt., which is equivalent to almost C$139 per ckg. The price of Saskatchewan SPI Index 100 hogs on Monday, July 6, ranged from $120 to $130 per ckg., with last weeks weekly pool price being $122.20 per ckg.  Hog prices are still well below producers' current production costs with Saskatchewan producers are losing an estimated $25 to $30 per slaughter weight hog sold.

Source: SPI Marketing Group, LMIC

United States Hog Production

The USDA's June 26, 2009, Quarterly Hogs and Pigs Report indicated that the total United States inventory of hogs and pigs on June 1, 2009, was 66.079 million head, up 1.1 per cent from 65.369 million head on March 1, 2009, but down 2.0 per cent from 67.400 million head on June 1, 2008.

The market hog inventory on June 1, 2009, was 60.112 million head, up 1.2 per cent from 59.378 million head on March 1, 2009, but down 1.9 per cent from 61.269 million head on June 1, 2008. The market hog inventory numbers have declined by 2.4 per cent in the under-60-pound category, 2.0 per cent in the 60- to 119-pound category and 2.4 per cent in the 120- to 179-pound category, from a year ago. While U.S. production has not declined significantly, reduced live hog imports from Canada accounted for the majority of the inventory declines. For the first six months of 2009, Canadian exports of live weanling/feeder pigs into the U.S. were down about one million head.

The total breeding inventory in the United States on June 1, 2009, was 5.967 million head, down slightly from 5.991 million head on March 1, 2009, and down 164,000 head or about 2.7 per cent from 6.131 million head on June 1, 2008. 

The USDA's June Hogs and Pigs Inventory Report came in close to average trade estimates, with the market hog inventory slightly higher (98.1 per cent vs. 98.0 per cent estimate) and the breeding hog inventory slightly lower (97.3 per cent vs. 97.6 per cent estimate). The total inventory of hogs and pigs was very close to average trade estimates, at 98.0 per cent versus average trade estimates of 98.1 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 continues to increase, which has limited production decreases.  Productivity increased from 9.38 to 9.61 pigs per litter (+2.4 per cent) for March to May 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, while the March to May 2009 pig crop was 28.547 million head, down 83,000 head or 0.3 per cent from the same quarter in 2008. (Table#1) The U.S. pig crop over the last two quarters is down 240,000 head or 0.4 per cent from the same quarters in 2008.

Table 1: United States Quarterly Pig Crop

(1) December preceding year
Source: USDA Hogs and Pigs Report, June 2009

The number of sows farrowing during March to May 2009 was 2.971 million head, down 2.6 per cent from 3.052 million head during March to May 2008, and down 1.9 per cent from the same quarter in 2007. (Table#2) Actual farrowing numbers for the two quarters from December 2008 to May 2009 were down 174,000 head or 2.8 per cent from the same period ending May 2008.

Table 2: United States Quarterly Sows Farrowing, and Intentions

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

Farrowing intentions for the June-to-August 2009 period are estimated at 2.974 million head, down 3.3 per cent from 3.075 million head over the same period in 2008.  Farrowing intentions for the September-to-November 2009 period are estimated at 2.962 million head, down 2.2 per cent from 3.028 million head over the same quarter in 2008.  While farrowing intentions are estimated to be down two to three per cent for the next two quarters, the pig crop will probably be down only slightly if productivity continues to increase by two per cent and if 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 July 4, 2009, was estimated at 1.892 million head, up 10 per cent from 1.712 million head over the same period a year ago.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.015 million head per week, up slightly from 2.010 million head over the same period a year ago. (Table #3) Slaughter numbers over the last four weeks averaged 2.017 million head, up 1.10 per cent from 1.995 million head over the same period a year ago.

Table 3: United States Weekly Hog Slaughter

Source: USDA, LMIC

Pork production in the United States over the last eight weeks averaged an estimated 409 million pounds per week, up about 2.1 per cent from the same period a year ago, while pork production over the last four weeks averaged about 408 million pounds, up about 3.3 per cent from the same period a year ago. While U.S. hog slaughter numbers had declined significantly below year-ago numbers in March and April, the decline has tapered off in May and June.

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending June 27, 2009, averaged 399,198 head, up 3.0 per cent from 387,521 head for the seven weeks ending June 21, 2008. In Canada, hogs slaughtered year-to-date ending June 27, 2009, totaled 10.366 million head, up 1.6 per cent from the same period in 2008.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending June 27, 2009, averaged 158,497 head, up 8.9 per cent from 145,497 head for the seven weeks ending June 21, 2008.  In Western Canada, hogs slaughtered year-to-date ending June 27, 2009, totaled 3.949 million head, up 3.4 per cent from 3.820 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 95,092 head per week over the six weeks ending June 20, 2009, down 27.7 per cent or 36,411 head per week compared to 131,503 head per week over the six weeks ending June 14, 2008.  Weekly weanling and feeder hog exports since early May have declined below 100,000 head per week. Weanling/feeder hog export numbers have declined significantly after peaking early in 2008 at 150,000 to 160,000 hogs per week.

Canadian slaughter weight hog exports to the United States averaged 22,162 head per week over the six weeks ending June 20, 2009, down 41.1 per cent or 15,438 head per week from 37,600 head per week over the six weeks ending June 14, 2008.  Slaughter hog export numbers have declined significantly after peaking at 80,000 to 90,000 hogs per week late in 2007.  COOL has been a very big factor in reduced live hog exports to the United States.   Canadian hog producers are being discounted by U.S. packers for selling their slaughter weight hogs into the U.S.

Combined weekly Canadian hog slaughter and total live hog exports to the United States over the six-week period ending June 20, 2009, averaged 519,153 head per week, down 6.5 per cent from 555,336 head per week over the six weeks ending June 14, 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 July 4, 2009, averaging $54.65 per cwt., down slightly from $54.85 per cwt. the previous week, but down $24.47 per cwt. or 30.9 per cent from $79.12 per cwt. a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $37.14 per cwt., up $2.67 per cwt. or 7.7 per cent from $34.47 per cwt. the previous week, but down $34.10 per cwt. or 47.9 per cent from $71.24 per cwt. a year ago. Loins (51 to 52 per cent lean) averaged $71.11 per cwt., down slightly from $71.72 per cwt. the previous week, and down $25.73 per cwt. or 26.6 per cent from $96.84 per cwt. a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $63.20 per cwt., up slightly from $63.17 per cwt. the previous week, but down $20.19 per cwt. or 24.2 per cent from $83.39 per cwt. a year 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 584.1 million lb. on May 31, 2009, down 4.6 per cent from 612.3 million pounds on April 30, 2009, but up 0.8 per cent from 579.4 million lb. on May 31, 2008.  Pork stocks overall have declined since April, with the biggest decreases in loins (-20 per cent) and ribs (-18 per cent) while hams have increased (+23 per cent).  Overall, total pork stocks in cold storage are still above their five-year average.

The United States' beef stocks in cold storage totaled 414.3 million lb. on May 31, 2009, up 0.9 per cent from 410.7 million lb. on April 30, 2009, but down 1.4 per cent from 420.4 million lb. on May 31, 2008.

The United States' poultry stocks in cold storage totaled 1,232.1 million lb. on May 31, 2009, down slightly from 1,235.4 million lb. on April 30, 2009, and down 3.7 per cent from 1,280.0 million lb. on May 31, 2008.

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.230 billion lb. on May 31, 2009, down 1.2 per cent from 2.258 billion lb. on April 30, 2009, and down 2.2 per cent from 2.280 billion lb. on May 31, 2008.

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

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) continue to be weak during a period when prices are typically their strongest. Pork cutout values continue to be weak, about US$55 per cwt., well below year-ago prices of just below US$80 per cwt.. 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 disappeared in recent weeks. Also, hog weights are higher year-over-year, actually increasing U.S. pork production by two to three per cent over the last two months. Pork in cold storage has decreased by 4.6 per cent from April to May, but is 0.8 per cent higher than a year ago. Total meat in U.S. cold storage has decreased by 1.2 per cent or 28 million lb. from April to May, while total meat supplies are 49 million lb., or 2.2 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.

In their June Quarterly Hogs and Pigs Report Summary, Glenn Grimes and Ron Plain of the University of Missouri commented that the current problem with low prices is caused by weak demand at the export level and by the large supply of pork.  U.S. pork exports were down 21.5 per cent for the month of April, compared to April 2008, and pork exports for the January to April period were down 10.8 per cent from the same period a year ago. The biggest decreases to U.S. pork exports over this period occurred in Russia (-47.2 per cent), and China and Hong Kong (-64.2 per cent).

Grimes and Plain have estimated that United States' commercial hog slaughter numbers would decline to 27.8 million head in the third quarter (down 3.2 per cent) of 2009 and decline to 29.2 million head (down 3.4 per cent) in the fourth quarter of 2009.  While they have predicted that slaughter numbers will decline over the next two quarters when compared to 2008, Grimes and Plain have estimated that the domestic supply of pork will be equal to last year assuming heavier hog weights and reduced pork exports. Grimes and Plain have estimated that U.S. hog prices in these two quarters would therefore be lower than the same quarters in 2008. (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 (June 29, 2009)

Lean hog futures contracts have declined significantly since the end of April. Futures prices have rebounded by a few dollars in the week since the June USDA Hogs and Pigs Report was released. Lean hog futures prices have been volatile since the H1N1 outbreak, given continuing concerns over global pork demand.  (Table #6)

Table 6: 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 $120 to $130 per ckg. for the third quarter of 2009, and average between $115 to $125 per ckg. for the fourth quarter of 2009. Canadian hog producers are dealing with some big challenges stemming from COOL, the H1N1 flu virus, and the fluctuations in the value of the Canadian dollar.  Hog producers who took some precautionary measures early in 2009 and did some risk management by hedging some of their hog prices, will be in a significantly better position.

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.  The current bans on North American live hogs and pork by countries such as China and Russia have reduced overall North American hog and pork exports. As in 2008, a surge in pork exports this summer is needed to 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