January 6, 2010

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 in December but remain below producers' current cost of production. Average daily Iowa prices in December ranged between US$56.43 and $64.56 per cwt. The Iowa/Minnesota carcass price on Tuesday, January 5, averaged US$66.26 per cwt, which is equivalent to over CDN$142 per ckg. The price of Saskatchewan SPI Index 100 hogs on January 5, ranged from $120 to $130 per ckg, with last week's weekly pool price being $119 per ckg.

United States Hog Production

The USDA's December 30, 2009, Quarterly Hogs and Pigs Report indicated that the total U.S. inventory of hogs and pigs on December 1, 2009, was 65.807 million head, down 1.5 per cent from 66.826 million head on September 1, 2009, and down 2.0 per cent from 67.148 million head on December 1, 2008.

The market hog inventory on December 1, 2009, was 59.957 million head, down 1.6 per cent from 60.952 million head on September 1, 2009, and down 1.8 per cent from 61.087 million head on December 1, 2008. Compared to a year ago, the market hog inventory numbers have declined by 1.8 per cent in the under-50-lb. category, 1.9 per cent in the 50- to 119-lb category, 1.6 per cent in the 120- to 179-lb category, and 2.2 per cent in the 180 pound and over category.

The total breeding inventory in the United States on December 1, 2009, was 5.850 million head, down 0.4 per cent from 5.875 million head on September 1, 2009, and down 212,000 head or about 3.5 per cent from 6.062 million head on December 1, 2008.

The USDA's December Hogs and Pigs Inventory Report came in a little less positive overall than average trade estimates, with total inventory of hogs and pigs down 1.8 per cent, which was less than the average trade estimates of a 2.4 per cent decline.  Market hog inventories were down less than trade estimates (down 2.0 per cent vs. 2.3 per cent estimate) while the breeding hog inventories (down 3.5 per cent vs. 3.4 per cent estimate) were a touch better than estimated.  

While the U.S. breeding herd has declined over the last four quarters, U.S. sow productivity continues to increase, which has limited production decreases.  Productivity increased from 9.50 to 9.70 pigs per litter (+2.1 per cent) for September to November 2009 from the same quarter in 2008. Productivity over the last four quarters, compared to the same quarters a year ago, has increased between 2.0 and 2.6 per cent. 

The September to November 2009 U.S. pig crop was 28.833 million head, up 62,000 head or 0.2 per cent from the same quarter in 2008, while the June to August 2009 pig crop was 28.777 million head, down 463,000 head or 1.6 per cent from the same quarter in 2008. (Table#1) The U.S. pig crop over the last two quarters is down 401,000 head or 0.7 per cent from the same two quarters in 2008.

Table 1: United States Quarterly Pig Crop

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

The number of sows farrowing during September to November 2009 was 2.974 million head, down 1.8 per cent from 3.028 million head during September to November 2008, and down 6.5 per cent from the same quarter in 2007. (Table#2) Actual farrowing numbers for the two quarters from June 2009 to November 2009 were down 164,000 head or 2.7 per cent from the same period ending November 2008.

Table 2: United States Quarterly Sows Farrowing, and Intentions

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

Farrowing intentions for the December-to-February 2010 period are estimated at 2.954 million head, down 1.9 per cent from 3.011 million head over the same period ending February 2009.  Farrowing intentions for the March-to-May 2010 period are estimated at 2.935 million head, down 2.7 per cent from 3.018 million head over the same quarter in 2009.  While farrowing intentions are estimated to be down on average 2.3 per cent for the next two quarters, the decline in the pig crop will be less if the increase in productivity continues.

United States Hog Slaughter

The number of hogs slaughtered under federal inspection in the U.S. for the short week ending January 2, 2010, was estimated at 1.926 million head, up 1.4 per cent from 1.899 million head over the same period a year ago.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.135 million head per week, down 2.1 per cent from 2.181 million head over the same period a year ago (Table#3).

Table 3: United States Weekly Hog Slaughter

Source: USDA, LMIC

U.S. pork production over the last eight weeks averaged an estimated 433 million lb. per week, down 2.1 per cent from the same period a year ago, while pork production over the last six weeks averaged almost 421 million lb., down about 2.3 per cent from the same period a year ago.

Canadian Hog Slaughter

In Canada, federal and provincial hog slaughter numbers over the six weeks ending December 19, 2009, averaged 448,666 head, up 0.8 per cent from 445,195 head for the six weeks ending December 13, 2008. In Canada, hogs slaughtered year-to-date ending December 19, 2009, totaled 21.055 million head, up 2.5 per cent from the same period in 2008.

In Western Canada, federal and provincial hog slaughter numbers for the six weeks ending December 19, 2009, averaged 174,329 head, up 4.4 per cent from 167,048 head for the six weeks ending December 13, 2008.  In Western Canada, hogs slaughtered year-to-date ending December 19, 2009, totaled 8.149 million head, up 6.0 per cent from 7.691 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 89,498 head per week over the six weeks ending December 19, 2009, down 24.4 per cent compared to 114,493 head per week over the six weeks ending December 13, 2008.  Year-to-date, weanling and feeder hog exports in 2009 totaled 4,841,455 head, down 25.6 per cent or 1,668,621 head from the same period in 2008.  Weanling and feeder hog exports in 2009 are estimated to be about 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 25,540 head per week over the six weeks ending December 19, 2009, down 24.1 per cent from 29,708 head per week over the six weeks ending December 13, 2008. Year-to-date, slaughter hog exports in 2009 have totaled 1,135,184 head, down 48.5 per cent or 1,070,857 head from 2008. Slaughter hog export numbers in 2009 are estimated to be about 1.18 million head, down from 2.31 million head in 2008 and 3.28 million head in 2007.

Combined weekly Canadian hog slaughter and total live hog exports to the U.S. over the six-week period ending December 19, 2009, averaged 557,704 head per week, down 5.4 per cent from 589,396 head per week over the six weeks ending December 13, 2008. The combined year-to-date totals as of December 19, 2009, were 27.032 million head, down 2.236 million head or 7.6 per cent from 29.268 million head over the same period in 2008.  This is a decline of over 2.2 million head from 2008.

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

The pork cutout value (185 lb.) in the U.S. ended the week of January 2, 2010, averaging $67.73 per cwt, down $0.42 per cwt or 0.6 per cent from $68.15 per cwt the previous week, but up $12.88 per cwt or 23.5 per cent from $54.85 per cwt a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $55.13 per cwt, down $1.32 per cwt or 2.3 per cent from $56.45 per cwt the previous week, but up $20.81 per cwt or 60.6 per cent from $34.32 per cwt a year ago. Loins (51 to 52 per cent lean) averaged $90.39 per cwt, down $0.93 per cwt or 1.0 per cent from $91.32 per cwt the previous week, but up $12.89 per cwt or 16.6 per cent from $77.50 per cwt a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $77.19 per cwt, up $2.54 per cwt or 3.4 per cent from $74.65 per cwt the previous week, and up $7.23 per cwt or 10.3 per cent from $69.96 per cwt a year ago (Table #4). Overall, pork cutouts were down for the week except bellies.

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 487.2 million lb. on November 30, 2009, down 5.6 per cent from 516.3 million lb. on November 31, 2009, and down 7.5 per cent from 526.7 million lb. on November 30, 2008.  Pork stocks in cold storage were below 500 million pounds for the first time since December 2007. Increases in bellies, loins, ribs, and butts were more than offset by declines in hams and other meats from October storage levels. 

The United States' beef stocks in cold storage totaled 430.8 million lb. on November 30, 2009, down 0.7 per cent from 427.7 million lb. on October 31, 2009, and down 10.5 per cent from 481.6 million lb. on November 30, 2008.

The United States' poultry stocks in cold storage totaled 893.2 million lb. on November 30, 2009, down 22.4 per cent from 1,150.7 million lb. on October 31, 2009, and down 23.9 per cent from 1,173.4 million lb. on November 30, 2008.  A large drop in whole turkey stocks (Thanksgiving) was the reason for the large decrease from October stocks and year-over-year stocks, setting an overall decline. 

Combined United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 1.811 billion lb. on November 30, 2009, down 13.5 per cent from 2.095 billion lb. on October 31, 2009, and down 17.0 per cent from 2.182 billion lb. on November 30, 2008 (Table#5).  Total meat in cold storage was below two billion pounds for the first time since December 2007.

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

Source: NASS

Market Overview and Prices       

North American cash hog prices (Iowa/Minn.) have improved in December as overall pork cutout values have improved. Pork in U.S. cold storage has declined 5.6 per cent from October to November, and 7.5 per cent year-over-year. Pork stocks were below 500 million pounds for the first time in almost two years. Total meat in U.S. cold storage has decreased by 13.5 per cent or 284 million lb. from October to November, while total meat supplies are 370 million lb. or 17.0 per cent lower than a year ago. Total meat supplies were below two billion lb. for the first time in almost two years.

In their December Quarterly Hogs and Pigs Report Summary, Glenn Grimes and Ron Plain of the University of Missouri commented that the U.S. domestic demand index for pork for January to November 2009 was up 3.1 per cent at the consumer level but live hog demand was down 4.4 per cent compared to the same period a year ago.  The processor-retailer margin was up 9.1 per cent while the packer margin was down 6.4 per cent over this 11-month period, compared to the same period in 2008, according to Grimes and Plain.

Grimes and Plain have estimated that U.S. commercial hog slaughter numbers year-over-year will decline to 27.775 million head (down 2.5 per cent) in the first quarter of 2010, decline to 26.520 million head (down 2.0 per cent) in the second quarter of 2010, and decline to 27.850 million head (down 2.0 per cent) in the third quarter of 2010.  These quarterly slaughter estimates were revised up from their September report. (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 (December 31, 2009)

The nearby lean hog futures prices have improved since early November and have had a positive last few days. The April to July months have had the most noticeable improvement. Nearby futures prices for the first half of 2010 have improved on average by about US$11 per cwt or 15 to 20 per cent since early September. Current cash hog prices to June futures (US$ per cwt.) have over a $12 spread, while July is under an $11 spread. These spreads have declined over the last month with increases to cash hog prices. Cash prices will trend upwards into spring and summer.  While cash hog prices will continue to move higher towards lean hog futures prices, producers need to look at downside versus upside potential.  Based on the recent USDA report, U.S. pig crops over the next two quarters may not be reduced significantly from the previous year, if productivity continues to increase.  

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 $122 to $127 per ckg for the first quarter of 2010, and average between $137 to $142 per ckg in the second quarter of 2010. However, if export demand does not pick up or 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.

Source: Chicago Mercantile Exchange

To improve hog prices, we will need increases in North American pork exports or a continued decline in North American hog numbers.  North American hog prices will trend upward slowly over the next two quarters, assuming continued reductions in pork production and no further demand issues.  Reduced weekly U.S. slaughter numbers into spring and summer could be the main factor affecting hog prices early in 2010.

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