October 7, 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$47 to $50 per cwt. Continued high United States' (U.S.) pork production, combined with reduced pork exports, are the main reasons for these weaker prices. The Iowa/Minnesota carcass price on Tuesday, October 6, averaged US$49.23 per cwt, which is equivalent to just under CDN$108 per ckg. The price of Saskatchewan SPI Index 100 hogs on October 6, ranged from $90 to $100 per ckg, with last week's weekly pool price being $97.30 per ckg. Hog prices continue to be well below producers' current production costs.  

United States Hog Production

The USDA's September 25, 2009, Quarterly Hogs and Pigs Report indicated that the total U.S. inventory of hogs and pigs on September 1, 2009, was 66.626 million head, up 0.5 per cent from 66.259 million head on June 1, 2009, but down 2.3 per cent from 68.196 million head on September 1, 2008.

The market hog inventory on September 1, 2009, was 60.752 million head, up 0.8 per cent from 60.292 million head on June 1, 2009, but down 2.2 per cent from 62.135 million head on September 1, 2009. The market hog inventory numbers have declined by 3.7 per cent in the under-60-lb. category, 2.1 per cent in the 60- to 119-lb category and 1.4 per cent in the 120- to 179-lb 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 decline. For the first nine months of 2009, Canadian exports of live weanling/feeder pigs into the U.S. were down over 1.34 million head from the same period a year ago.

The total breeding inventory in the United States on September 1, 2009, was 5.874 million head, down 1.6 per cent from 5.967 million head on June 1, 2009, and down 187,000 head or about 3.1 per cent from 6.061 million head on September 1, 2008. 

The USDA's September Hogs and Pigs Inventory Report came in a little more positive than average trade estimates, with the market hog (down 2.2 per cent vs. 1.7 per cent estimate) and the breeding hog (down 3.1 per cent vs. 2.6 per cent estimate) inventories lower than previously estimated. The total inventory of hogs and pigs was down 2.3 per cent, which was better than the average trade estimates of a 1.8 per cent decline.

While the U.S. breeding herd has declined over the last three quarters, U.S. sow productivity continues to increase, which has limited production decreases.  Productivity increased from 9.51 to 9.70 pigs per litter (+2.0 per cent) for June to August 2009 from the same quarter in 2008.

The March to May 2009 U.S. pig crop was 28.547 million head, down 83,000 head or 0.3 per cent from the same quarter in 2008, while the June to Aug. 2009 pig crop was 28.772 million head, down 468,000 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 551,000 head or about one 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, September 2009

The number of sows farrowing during June to August 2009 was 2.966 million head, down 3.5 per cent from 3.075 million head during June to August 2008, and down 5.3 per cent from the same quarter in 2007. (Table#2) Actual farrowing numbers for the two quarters from March 2009 to August 2009 were down 190,000 head or 3.1 per cent from the same period ending August 2008.

Table 2: United States Quarterly Sows Farrowing, and Intentions

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

Farrowing intentions for the September-to-November 2009 period are estimated at 2.935 million head, down 3.1 per cent from 3.028 million head over the same period in 2008.  Farrowing intentions for the December-to-February 2010 period are estimated at 2.930 million head, down 3.1 per cent from 3.024 million head over the same quarter in 2009.  While farrowing intentions are estimated to be down over three per cent for the next two quarters, the pig crop will probably be down only one per cent 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 US for the week ending October 3, 2009, was estimated at 2.329 million head, up 0.3 per cent from 2.322 million head over the same period a year ago.  Slaughter numbers in the United States over the last eight weeks averaged an estimated 2.247 million head per week, up slightly from 2.244 million head over the same period a year ago (Table#3). Slaughter numbers over the last four weeks averaged 2.258 million head, down 2.8 per cent from 2.323 million head over the same period a year ago.

Table 3: United States Weekly Hog Slaughter

Source: USDA, LMIC

U.S. pork production over the last eight weeks averaged an estimated 450 million lb. per week, up 1.5 per cent from the same period a year ago, while pork production over the last four weeks averaged almost 452 million lb., down about 2.1 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 September 26, 2009, averaged 421,679 head, up 5.7 per cent from 398,880 head for the seven weeks ending September 20, 2008. In Canada, hogs slaughtered year-to-date ending September 26, 2009, totaled 15.742 million head, up 2.8 per cent from the same period in 2008.

In Western Canada, federal and provincial hog slaughter numbers for the seven weeks ending September 26, 2009, averaged 167,126 head, up 15.5 per cent from 144,729 head for the seven weeks ending September 20, 2008.  In Western Canada, hogs slaughtered year-to-date ending September 26, 2009, totaled 6.068 million head, up 6.2 per cent from 5.714-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 89,148 head per week over the six weeks ending September 12, 2009, down 30.5 per cent compared to 128,371 head per week over the six weeks ending September 6, 2008.  Year-to-date, weanling and feeder hog exports in 2009 totaled 3.679 million head, down 26.7 per cent or 1.339 million head from the same period in 2008.  Weanling and feeder hog export numbers have declined significantly from their peak early in 2008 when they were ranging from 150,000 to 160,000 hogs per week.

Canadian slaughter-weight hog exports to the U.S. averaged 23,120 head per week over the six weeks ending September 12, 2009, down 38.2 per cent from 37,437 head per week over the six weeks ending September 6, 2008. Year-to-date, slaughter hog exports in 2009 have totaled 853,056 head, down 52.8 per cent or 952,807 head from 2008. Slaughter hog export numbers have declined significantly since they peaked late in 2007 when they were ranging from 80,000 to 90,000 hogs per week.  

Combined weekly Canadian hog slaughter and total live hog exports to the U.S. over the six-week period ending September 19, 2009, averaged 531,094 head per week, down 5.1 per cent from 559,856 head per week over the six weeks ending September 6, 2008. The combined year-to-date totals as of September 19, 2009, were 19.834 million head, down 1.872 million head or 8.6 per cent from 21.706 million head over the same period in 2008.  

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

The pork cutout value (185 lb.) in the US ended the week of October 3, 2009, averaging $53.99 per cwt, down $1.43 per cwt or 2.6 per cent from $55.42 per cwt the previous week, and down $19.45 per cwt or 26.5 per cent from $73.44 per cwt a year ago.  Hams (51 to 52 per cent lean) ended the week averaging $46.25 per cwt, up $0.33 per cwt or 0.7 per cent from $45.92 per cwt the previous week, but down $23.66 per cwt or 33.8 per cent from $69.91 per cwt a year ago. Loins (51 to 52 per cent lean) averaged $68.38 per cwt, down $4.71 per cwt or 6.4 per cent from $73.09 per cwt the previous week, and down $21.89 per cwt or 24.2 per cent from $90.27 per cwt a year ago.  Bellies (51 to 52 per cent lean) closed the week averaging $67.41 per cwt, down $0.42 per cwt or 0.6 per cent from $67.83 per cwt the previous week, and down $15.05 per cwt or 18.2 per cent from $82.46 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 517.9 million lb. on August 31, 2009, down 4.0 per cent from 539.7 million lb. on July 31, 2009, but up 3.0 per cent from 502.7 million lb. on August 31, 2008.  Pork stocks overall (bellies, loins, and ribs) have declined since July. Only hams have increased, by 3.5 per cent from July. 

The United States' beef stocks in cold storage totaled 426.4 million lb. on August 31, 2009, down 4.8 per cent from 447.8 million lb. on July 31, 2009, and down 3.3 per cent from 441.1 million lb. on August 31, 2008.

The United States' poultry stocks in cold storage totaled 1,290.6 million lb. on August 31, 2009, down 2.9 per cent from 1,328.7 million lb. on July 31, 2009, and down 7.0 per cent from 1,386.9 million lb. on August 31, 2008.  Chicken stocks have decreased from last year's levels and July levels, setting an overall decline. 

Total United States' pork, beef, chicken, turkey and duck stocks in cold storage totaled 2.235 billion lb. on August 31, 2009, down 3.5 per cent from 2.316 billion lb. on July 31, 2009, and down 4.1 per cent from 2.331 billion lb. on August 31, 2008 (Table#5).

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 as U.S. hog slaughter numbers and pork production continue to exceed current demand. Pork cutout values declined last week and are well below (26 per cent) year-ago prices of just above US$73 per cwt.  Reduced North American pork exports have weighed heavily on the market. The U.S. Meat Export Federation released some pork export numbers showing overall U.S. pork exports (January to July 2009) were down 10 per cent by quantity and nine per cent by value.  The most significant declines were to China (down 70 per cent), Hong Kong (down 30 per cent), and Russia (down 30 per cent). While monthly U.S. pork exports for July 2009 are down 15.7 per cent by quantity from July 2008, they have rebounded 13.9 per cent from June 2009.  U.S. pork in cold storage has decreased by 4.0 per cent from July to August, but is 3.0 per cent higher than a year ago. Total meat in U.S. cold storage has decreased by 3.5 per cent or 81 million lb. from July to August, while total meat supplies are 96 million lb., or 4.1 per cent lower than a year ago. However, total meat supplies in the United States continue to be at the upper end of cold storage numbers compared to the last five years.

In their September 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 August 2009 was up 3.9 per cent at the consumer level but live hog demand was down 4.7 per cent compared to the same period a year ago.  The weaker live hog demand versus domestic consumer demand was due to the 20-per cent decline in exports in 2009 compared to 2008.  Retail pork prices in the U.S. were up 1.8 per cent for the first eight months of 2009, but are down 0.8 per cent from July to August 2009, and down 2.8 per cent from August 2008.

Grimes and Plain have estimated that U.S. commercial hog slaughter numbers would decline to 29.67 million head (down 1.8 per cent) in the fourth quarter of 2009, decline to 27.435 million head (down 3.7 per cent) in the first quarter of 2010, and decline to 26.2 million head (down 3.2 per cent) in the second quarter of 2010.  The third and fourth quarter estimates have been revised up from June 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 (September 28, 2009)
Source: Chicago Mercantile Exchange

The nearby lean hog futures prices rallied early in September, plateaued in mid- September, and have declined over the last two weeks in September before rebounding over the last few days. However, lean hog prices continue to be well below prices earlier in the year, as recently as July. The Canadian dollar has jumped over the last few days and, if it continues to rise, will continue to have a negative effect on Canadian hog prices. 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 $100 to $110 per ckg for the first quarter of 2010. Significant herd liquidation could occur at these prices.

To improve hog prices, we will need an increase in North American pork exports or a large drop in North American hog numbers. With North American pork exports down and not expected to increase in the short term, reduced sow numbers will probably be the logical answer.  While there has been some U.S. sow liquidation, increased productivity and hog weights in the U.S. has limited production declines. U.S. pork production will probably need to decline significantly before we see a rapid rebound in hog prices.  At current pork production and export levels, 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