December 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.) have continued to improve over the last few weeks but remain below producers' current cost of production. Average daily Iowa prices over the last three weeks ranged between US$51.45 and $60.39 per cwt. The Iowa/Minnesota carcass price on Monday, December 7, averaged US$60.39 per cwt, which is equivalent to over CDN$131 per ckg. The price of Saskatchewan SPI Index 100 hogs on December 7, ranged from $110 to $120 per ckg, with last week's weekly pool price being $111 per ckg.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the US for the week ending December 5, 2009, was estimated at 2.267 million head, down 4.3 per cent from 2.368 million head over the same period a year ago.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.267 million head per week, down 1.6 per cent from 2.304 million head over the same period a year ago (Table#1). Slaughter numbers over the last four weeks averaged 2.232 million head, down 1.9 per cent from 2.276 million head over the same period a year ago. While weekly slaughter numbers have increased as per seasonal trends, numbers are below year-ago averages.

Table 1: United States Weekly Hog Slaughter

Source: USDA, LMIC

U.S. pork production over the last eight weeks averaged an estimated 460 million lb. per week, down 1.4 per cent from the same period a year ago, while pork production over the last four weeks averaged almost 454 million lb., down about 1.8 per cent from the same period a year ago.

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the seven weeks ending November 28, 2009, averaged 436,929 head, up 0.8 per cent from 433,603 head for the seven weeks ending November 22, 2008. In Canada, hogs slaughtered year-to-date ending November 28, 2009, totaled 19.701 million head, up 2.5 per cent from the same period in 2008. Canadian hog slaughter increases over the last two months have been reduced from earlier in the year; probably in relation to the rebound in the value of the Canadian dollar.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending November 28, 2009, averaged 171,568 head, up 4.3 per cent from 164,445 head for the seven weeks ending November 22, 2008.  In Western Canada, hogs slaughtered year-to-date ending November 28, 2009, totaled 7.620 million head, up 6.0 per cent from 7.188 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 89,655 head per week over the six weeks ending November 21, 2009, down 22.0 per cent compared to 114,984 head per week over the six weeks ending November 15, 2008.  Year-to-date, weanling and feeder hog exports in 2009 totaled 4,489,628 head, down 26.0 per cent or 1,576,756 head from the same period in 2008.  Weanling and feeder hog exports in 2009 are estimated to be just above five million head based on current numbers, down from just over seven million head in 2008.

Canadian slaughter-weight hog exports to the U.S. averaged 21,687 head per week over the six weeks ending November 21, 2009, down 26.9 per cent from 29,657 head per week over the six weeks ending November 15, 2008. Year-to-date, slaughter hog exports in 2009 have totaled 1,047,219 head, down 50.0 per cent or 1,045,836 head from 2008. Slaughter hog export numbers in 2009 are estimated to be just over 1.177 million head, down from 3.281 million head in 2007.

Combined weekly Canadian hog slaughter and total live hog exports to the U.S. over the six-week period ending November 21, 2009, averaged 546,675 head per week, down 4.9 per cent from 574,942 head per week over the six weeks ending November 15, 2008. The combined year-to-date totals as of November 21, 2009, were 24.791 million head, down 2.131 million head or 7.9 per cent from 26.922 million head over the same period in 2008.  The Canadian hog industry will be marketing over two million fewer head in 2009.

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

The pork cutout value (185 lb.) in the US ended the week of December 5, 2009, averaging $62.76 per cwt, up $2.49 per cwt or 4.1 per cent from $60.27 per cwt the previous week, and up $2.35 per cwt or 3.9 per cent from $60.41 per cwt a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $65.14 per cwt, up $7.39 per cwt or 12.8 per cent from $57.75 per cwt the previous week, and up $9.76 per cwt or 17.6 per cent from $55.38 per cwt a year ago. Loins (51 to 52 per cent lean) averaged $68.12 per cwt, up $1.65 per cwt or 2.5 per cent from $66.47 per cwt the previous week, but down $4.07 per cwt or 5.6 per cent from $72.19 per cwt a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $69.30 per cwt, down $0.31 per cwt or 0.5 per cent from $69.61 per cwt the previous week, and down $4.76 per cwt or 6.4 per cent from $74.06 per cwt a year ago (Table #2). Overall, pork cutouts have had a strong few weeks.

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 520.1 million lb. on October 31, 2009, down 1.6 per cent from 528.7 million lb. on September 30, 2009, and down 1.5 per cent from 528.0 million lb. on October 31, 2008.  Increases in loins, ribs, and butts were more than offset by declines in hams and other meats from September storage levels. 

The United States' beef stocks in cold storage totaled 426.4 million lb. on October 31, 2009, down 0.6 per cent from 428.9 million lb. on September 30, 2009, and down 9.5 per cent from 471.0 million lb. on October 31, 2008.

The United States' poultry stocks in cold storage totaled 1,148.4 million lb. on October 31, 2009, down 8.4 per cent from 1,253.5 million lb. on September 30, 2009, and down 16.0 per cent from 1,367.7 million lb. on October 31, 2008.  Chicken and turkey stocks have decreased from last year's levels, setting an overall decline. 

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.095 billion lb. on October 31, 2009, down 5.2 per cent from 2.211 billion lb. on September 30, 2009, and down 11.5 per cent from 2.331 billion lb. on October 31, 2008 (Table#3).

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

Source: NASS

In Canada, stocks of frozen and chilled pork totaled 43,713 tonnes (96.370M lb.) for October 2009, down 6.5 per cent from 46,742 tonnes (103.047M lb.) in July 2009, but up 14.9 per cent from 38,055 tonnes (83.896M lb.) in October 2008.  When combining Canada and U.S. numbers, pork stocks in October totaled about 616.5 million pounds, up 0.7 per cent from 611.9 million pounds in October 2008.

Market Overview and Prices

North American cash hog prices (Iowa/Minn.) have improved over the last few weeks as overall pork cutout values have improved. Weekly average pork cutout values have improved by over $5/cwt or 9.0 per cent over the last three weeks.  Pork in U.S. cold storage has declined 1.6 per cent from September to October, and 1.5 per cent year-over-year. Total meat in U.S. cold storage has decreased by 5.2 per cent or 116 million lb. from September to October, while total meat supplies are 272 million lb. or 11.5 per cent lower than a year ago.

The nearby lean hog futures prices have improved significantly since early fall and have leveled off over the last week. Nearby futures prices for the first half of 2010 have improved by about US$10 per cwt or 15 to 20 per cent since early September. Current cash prices to May futures have about a $15 spread while July has an $18 spread. Cash prices will trend upwards into spring and summer.  The question is whether they will reach, exceed or fall short of the current futures. With the rally in lean hog futures prices, producers are considering locking in some spring/summer prices. While prices could go higher, producers need to look at downside versus upside potential. For Canadian hog producers, the additional headache of dealing with the exchange rate makes matters more complex. While the dollar is in the 94¢ to 95¢ range, some bank economists are predicting near-parity, to parity, by the second quarter 2010. If cash prices were to drop while the dollar climbed it would be a double negative for Canadian producers.  The next USDA Hogs and Pigs Report should help clarity the extent of reductions in the U.S. herd. The U.S. breeding herd has been reducing at a slow pace to date.  U.S. hog slaughter numbers year-to-date in 2009 only have declined by about two per cent.  In Canada, we are declining significantly, but don't influence the market enough to cause large price spikes.

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 $116 to $126 per ckg for the first quarter of 2010, and average between $133 to $143 per ckg in the second quarter of 2010. However, if export demand does not pick up and U.S. hog slaughter numbers do not continue to decline, these futures prices could be on the high side.  Canadian hog prices will continue to be significantly affected by any large changes in the value of the Canadian versus U.S. dollar.

To improve hog prices, we will need increases in North American pork exports or a decline in North American hog numbers. The next USDA Hogs and Pigs Report at the end of December should clarify U.S. hog reductions. With North American pork exports down from year-ago numbers and not expected to significantly increase in the short term, reduced sow numbers will probably be the near-term solution.  Canadian hog production continues to decline with total market inventory numbers and breeding inventory numbers continuing to decline.  North American hog prices will trend upward slowly over the next two quarters with continued reductions in pork production and no further demand issues.

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