Hogs/Pork

Continued modest breeding herd increases and cautious farrowing intentions for the spring and summer quarters, as reported in the March 30 Quarterly Hogs and Pigs, suggest a continuation of the careful-but-steady growth that has characterized U.S. hog production for the past few years. The U.S. pork industry is expected to produce 21.575 billion pounds of pork this year, about 2.5 percent more than in 2006. Prices for live-equivalent 51-52 percent lean hogs are expected to range between $46 and $48 per cwt in the second quarter, and between $45 and $47 per cwt for the year. Pork exports in 2007 are expected to be over 11 percent larger than those of 2006. Pork imports in 2007 are expected to be about 6 percent lower than a year ago.

Quarterly Hogs and Pigs Points to Slower Production Increases in 2007

Continued modest breeding herd increases and cautious farrowing intentions for the spring and summer quarters, as reported in the March 30 Quarterly Hogs and Pigs, suggest a continuation of the careful-but-steady growth dynamic that has characterized U.S. hog production for the past few years. The Hogs and Pigs report indicated that on March 1, the “Kept for Breeding” category was about 1 percent larger than a year earlier, at the same time that per bushel corn prices were significantly higher than a year ago.

The breeding herd increases, occurring in a market environment dominated by higher and more volatile corn prices, suggest that the relatively new structure of hog production in the United States makes the industry less prone to rapid, large changes in breeding herd numbers—positive or negative—in response to external shocks. Contracts—both production and marketing—and high fixed costs of operating farrowing facilities are just two of the many features of the current structure of U.S. hog production that militate against large swings in breeding herd numbers. The cautious, muted producer response to significant feed price changes is different from sector response patterns of 25-30 years ago, when double-digit percentage changes in breeding herd inventories in response to price shocks was not uncommon.

Quarterly Hogs and Pigs reported that producers’ farrowing intentions for both the spring (March-May) and summer (June-August) quarters were about the same as in second and third quarters of last year. The stated intention for March-May of 2.913 million head is just slightly smaller than the 2.927, million head farrowed in the same quarter last year. Stated June-August intentions of 2.917 million head are just slightly larger than the 2.912 million head farrowed in the summer quarter of 2006. Cautious intentions are consistent with the current market environment that is dominated by uncertainty about feed costs.

The March report indicated revisions to litter rates for the second half of 2006, as well as for the first quarter (December-February) of 2007. The pigs-per litter figure for the second half of 2006 was revised downward, from 9.13 pigs-per litter to 9.11. The litter rate for the first quarter of this year was estimated at 9.08. The effect of the revisions is to reduce the year-over-year size of increase of litter rates, without reversing the positive growth trend. As a result, forecast growth in pigs per litter for the year has been reduced, which in turn translates into a slightly lower yearover- year increase in pork production for 2007. The U.S. pork industry is expected to produce 21.575 billion pounds of pork this year, about 2.5 percent more than in 2006. Prices for live-equivalent 51-52 percent lean hogs are expected to range between $46 and $48 per cwt in the second quarter, and between $45 and $47 per cwt for the year.

Large Exports Prompt Increase in 2007 Export Forecast

U.S. exporters shipped more than 528 million pounds of pork in January-February, an increase of about 9 percent over last year. A number of export markets registered double-digit year-over-year increases: Japan (27 percent), Russia (13 percent), and South Korea (21 percent).

Exports to Mexico—the second largest U.S. export market—fell 17 percent in the first 2 months. Japan’s year-over-year volume increase suggests that the largest importer of U.S. pork products is back in the market, after some retrenchment last year. Japan accounted for 36 percent of U.S. exports in the first 2 months, a share almost 3 times that of South Korea (13 percent), and almost 10 times larger than Russia’s share (5 percent). It is likely that Japan will be a very important source of export growth this year.

On the basis of large year-over-year increases in exports to important foreign markets, together with increases in 2007 forecasts for major pork importing countries(www.fas.usda.gov/dlp/circular/2007/livestock_poultry_04-2007.pdf) — South Korea and Russia, in particular—USDA’s forecast for 2007 pork exports was raised to 3.340 billion pounds, up from 2.997 in 2006. Exports in 2007 are expected to be almost 12 percent higher than those of 2006.

On the Flip-Side, 2007 Import Forecast Lowered

At 72.8 million pounds, January pork imports were almost 16 percent lower than a year ago,. Most of the year-over-year reduction is attributable to lower imports from Canada, likely due to the relatively high-priced Canadian currency, together with adequate domestic supplies of pork products in U.S. markets.

Lower-than-expected January imports, and expectations of continued weakness in imports from Canada, prompted a reduction in USDA’s forecast for 2007 pork imports, from 990 to 930 million pounds in March, reflecting the expectation of an 8-percent reduction in 2007 imports compared with last year.

Further Information