September 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.) continue to be weak with average Iowa prices over the last two weeks ranging between US$45 to $50 per cwt. Continued high United States' (US) pork production, combined with weaker pork exports due to H1N1 concerns and increased global production, are the main reasons for these weaker prices. The Iowa/Minnesota carcass price on Tuesday, September 8, averaged US$49.83 per cwt, which is equivalent to just over CDN$111 per ckg. The price of Saskatchewan SPI Index 100 hogs on Tuesday, September 8, ranged from $94 to $104 per ckg with last week's weekly pool price of $97.90 per ckg. Hog prices are well below producers' current production costs.  Declining feed prices have helped producers reduce their production costs and reduce losses.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the US for the week ending September 5, 2009, was estimated at 2.256-million head, up 10.1 per cent from 2.050-million head over the same period a year ago. Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.139-million head per week, down slightly from 2.144-million head over the same period a year ago (Table #1). Slaughter numbers over the last four weeks averaged 2.230-million head, up 3.0 per cent from 2.165-million head over the same period a year ago.

Table 1: United States Weekly Hog Slaughter

Source: USDA, LMIC

US pork production over the last eight weeks averaged an estimated 428-million pounds per week, up 2.2 per cent from the same period a year ago, while pork production over the last four weeks averaged 447-million pounds, up about 5.5 per cent from the same period a year ago. Higher US hog slaughter numbers and continued heavier hog weights, year-over-year, have increased pork production over the month from the same period in 2008.  

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending August 29, 2009, averaged 420,502 head, up 4.9 per cent from 400,826 head for the seven weeks ending August 23, 2008. In Canada, hogs slaughtered year-to-date ending August 29, 2009, totaled 14.076 million head, up 2.7 per cent from the same period in 2008.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending August 29, 2009, averaged 164,721 head, up 11.1 per cent from 148,210 head for the seven weeks ending August 23, 2008.  In Western Canada, hogs slaughtered year-to-date ending August 29, 2009, totaled 5.404-million head, up 5.3 per cent from 5.134-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 90,226 head per week over the six weeks ending August 22, 2009, down 27.6 per cent compared to 124,558 head per week over the six weeks ending August 16, 2008.  Year-to-date, weanling and feeder hog exports in 2009 totaled 3.315-million head, down 26.4 per cent or 1.191-million head from the same period in 2008.  Weanling and 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 US averaged 24,742 head per week over the six weeks ending August 22, 2009, down 29.9 per cent from 35,293 head per week over the six weeks ending August 16, 2008. Year-to-date, slaughter hog exports in 2009 have totaled 761,309 head, down 53.9 per cent or 889,170 head from 2008. Slaughter hog export numbers have declined significantly after peaking at 80,000 to 90,000 hogs per week late in 2007.  

Combined weekly Canadian hog slaughter and total live hog exports to the US over the six-week period ending August 22, 2009, averaged 532,839 head per week, down 4.8 per cent from 559,560 head per week over the six weeks ending August 16, 2008. The combined year-to-date totals as of August 22, 2009, were 17.716-million head, down 1.742-million head or 8.9 per cent from 19.458-million head in 2008.  

Canadian Hog Production

In August, Statistics Canada released the July 1^st Canadian hog inventory report. Total inventory of hogs in Canada for July 1, 2009, was estimated at 12.105-million head, down 6.7 per cent, or 875,000 head from 12.980-million head on July 1, 2008, but up 1.8 per cent from 11.885-million head on April 1, 2009. The April to July increase was probably due to more Canadian pigs being kept home instead of moving south into the US because of COOL. Total Canadian hog inventory has declined by 3.1-million head or 20.4 per cent since peaking at 15.205-million head on October 1, 2005.

The Canadian market herd inventory on July 1, 2009, was estimated at 10.725-million head, down 7.0 per cent, or 809,000 head from 11.534-million head on July 1, 2008, but up 2.4 per cent from 10.500-million head on April 1, 2009.  The Canadian market herd has declined by 2.860-million head or 21.1 per cent since peaking at 13.586-million head on October 1, 2005.   In Western Canada, the market herd inventory on July 1, 2009, was 4.377-million head, down 9.3 per cent from 4.825-million head on July 1, 2008, but up 2.5 per cent from 4.271-million head on April 1, 2009.  The April to July increase was from more Canadian pigs staying home due to COOL.

The Canadian breeding herd, consisting of sows and bred gilts, was estimated at 1.356- million head on July 1, 2009, down 4.4 per cent from 1.419-million head on July 1, 2008, and down slightly from 1.361-million head on April 1, 2009.  In Western Canada, the breeding herd of sows and bred gilts was estimated at 596,900 head on July 1, 2009, down 6.9 per cent from 641,500 head on July 1, 2008, and down 1.6 per cent from 606,300 head on April 1, 2009. The Canadian breeding herd will continue to decline into the fourth quarter.  The Canadian breeding herd has declined by 235,500 head or 14.8 per cent since peaking at 1.592-million head on April 1, 2005.

In Saskatchewan, total hog inventory as of July 1, 2009, was estimated at 810,000 head, down 16.6 per cent from 971,000 head a year ago, and down 585,000 head or 41.9 per cent from the peak in July 2005.  Sows and bred gilts' inventory as of July 1, 2009, was 93,000 head, down 22.2 per cent from 119,600 head from a year ago, and down 38,200 head or 29.1 per cent from the peak in July 2005. Market inventory numbers as of July 1, 2009, were 714,000 head, down 15.7 per cent from a year ago, and down 544,700 head or 43.3 per cent from the peak in July 2005.

According to Statistics Canada data, farrowing numbers for the first quarter of 2009 were 756,700 head, down 6.1 per cent from 805,700 head from first quarter 2008, and 738,500 head during the second quarter of 2009, down 6.9 per cent from 793,700 head from the second quarter 2008. Farrowing intentions for the third and fourth quarters of 2009 are estimated to be 740,700 head and 743,700 head, down 4.1 per cent and 5.5 per cent from the third and fourth quarters of 2008 (Table #2).

The total number of pigs born in Canada during the first and second quarters of 2009 was estimated at 16.134-million head, down 6.1 per cent or over one-million pigs from 17.183-million head during the first two quarters of 2008.

Table 2: Sows Farrowing and Pigs Born, Canada (thousand head)

(1) Estimated Farrowing Intentions
Source: Statistics Canada, August 2009

In Western Canada, farrowing numbers in 2009 were 349,400 head during the first quarter (down 12.9 per cent), and 350,200 head during the second quarter (down 9.4 per cent), compared to the same quarters in 2008.  Farrowing intentions for the third and fourth quarters of 2009 are estimated at 346,500 head and 346,200 head, down 5.9 per cent and 5.6 per cent from the same quarters a year ago (Table #3). The total number of pigs born in Western Canada during the first and second quarters of 2009 was 7,761,700 head, down 920,600 head or 10.6 per cent from 8,682,300 head born during the first two quarters of 2008.  

Table 3: Sows Farrowing and Pigs Born, Western Canada

(1) Estimated Farrowing Intentions
Source: Statistics Canada, August 2009

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

The pork cutout value (185 lb.) in the US ended the week of September 5, 2009, averaging $55.02 per cwt, down $1.53 per cwt or 2.7 per cent from $56.55 per cwt the previous week, and down $22.74 per cwt or 29.2 per cent from $77.76 per cwt a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $52.14 per cwt, down $4.82 per cwt or 8.5 per cent from $56.96 per cwt the previous week, and down $20.68 per cwt or 28.4 per cent from $72.82 per cwt a year ago. Loins (51 to 52 per cent lean) averaged $64.93 per cwt, down $0.60 per cwt or 0.9 per cent from $65.53 per cwt the previous week, and down $32.18 per cwt or 33.1 per cent from $97.11 per cwt a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $61.22 per cwt, up $3.33 per cwt or 5.7 per cent from $57.89 per cwt the previous week, but down $16.12 per cwt or 20.8 per cent from $77.34 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 547.3-million lb. on July 31, 2009, down 5.3 per cent from 577.9-million pounds on June 30, 2009, and up 8.3 per cent from 505.3-million lb. on July 31, 2008.  Pork stocks overall have declined since June, with declines in bellies, loins, butts, and ribs. Hams and picnics increased with hams having a material increase of over 21-million pounds or an 18.3 per cent increase from June. 

The United States' beef stocks in cold storage totaled 448.1-million lb. on July 31, 2009, up 3.1 per cent from 434.8-million lb. on June 30, 2009, and up 4.0 per cent from 430.8- million lb. on July 31, 2008.

The United States' poultry stocks in cold storage totaled 1,324.1-million lb. on July 31, 2009, up 5.6 per cent from 1,253.7-million lb. on June 30, 2009, but down 2.8 per cent from 1,362.0-million lb. on July 31, 2008.  Turkey stocks have increased from last year's levels while chicken stocks have declined, setting an overall decline. 

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.320-billion lb. on July 31, 2009, up 2.3 per cent from 2.266-billion lb. on June 30, 2009, and up 0.9 per cent from 2.298-billion lb. on July 31, 2008 (Table #5).

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

Source: NASS

Global News

In an effort to reduce pork supplies in the US, the USDA has announced that they will buy $30-million worth of pork immediately.
(Source: ThePigSite, September 4, 2009)
http://www.thepigsite.com/swinenews/21949/usda-agrees-to-help-us-pork-producers

China's hog production has rebounded strongly from their blue-ear disease problems in 2007.  China's pork prices declined early in 2009 on oversupply and concerns on the H1N1 influenza virus. Since then, pork prices in China have risen for 13 straight weeks, but are still 12 per cent lower compared to the same time a year ago.
(Source: ThePigSite, September 2, 2009).
http://www.thepigsite.com/swinenews/21946/soaring-pork-price-not-to-trigger-inflation

Pork production in Russia has increased early in 2009 by an estimated 8.2 per cent.  Overall meat production in Russia is estimated to increase by 550,000 tons by the end of 2009. (Source: ThePigSite, May 14, 2009)
http://www.thepigsite.com/swinenews/21093/russia-to-increase-meat-output

Market Overview and Prices

North American cash hog prices (Iowa/Minn.) continue to be weak with US hog slaughter numbers increasing on average over the last four weeks with increases in pork production. Pork cutout values declined last week and are well below year-ago prices of just below US$78 per cwt.  Reduced pork demand in the United States, particularly reduced export demand, has weighed heavily on the market. The US Meat Export Federation released some pork export numbers in August showing overall US pork exports (January to June 2009) were down nine per cent by quantity and seven per cent by value.  Pork exports by quantity to Hong Kong/China were down 52 per cent while exports to Russia were down 35 per cent.   The reduced demand from China and Russia appeared to start before the H1N1 out break as the (January to March 2009) numbers showed exports were already down 36 per cent and 38 per cent.  (Source: USDA and USMEF)  This raises the following question: if demand was already down from China and Russia (prior H1N1) and if those countries have increased their hog production, how will demand improve in the short term to consume the excess North American supply?  While Canada has continually reduced its sow herd (since 2005) and hog production, the US has not. With the US sow herd over four times the size of Canada's, the US needs to do some sow culling before hog prices can significantly improve in the coming months .  

Pork in cold storage has decreased by 5.3 per cent from June to July, but is 8.3 per cent higher than a year ago. Total meat in US cold storage has increased by 2.3 per cent or 53- million lb. from June to July, while total meat supplies are 21-million lb., or 0.9 per cent higher than a year ago. Total meat supplies in the United States continue to be at the upper end of cold storage numbers compared to the last five years.

The nearby lean hog futures prices have improved over the last few weeks after the big drop in futures prices at the end of July and early August. However, lean hog prices continue to be well below prices earlier in the year. Based on the current lean hog futures prices and the Canadian exchange rate futures, the futures market is indicating that Saskatchewan Index 100 hogs could average between $85 to $95 per ckg. for the fourth quarter of 2009, and average between $95 to $105 per ckg. for the first quarter of 2010. Significant herd liquidation will occur at these prices. The volatility in the value of the Canadian dollar versus the US dollar has increased again, which will influence Canadian hog prices in the coming months. To improve hog prices in the short-term the market will need a surge in North American pork exports or a large drop in North American hog numbers. With North American pork exports down and not expected to expand rapidly in the short term, sows need to be taken out of the system.  While Canada is on their second cull program the United States needs to develop a cull program or these weak prices will continue to drag into 2010.

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