September 1 Swine Inventories Largely Steady While Productivity Soars

Hogs/Pork:
The Quarterly Hogs and Pigs report, issued by the U.S. Department of Agriculture (USDA) on September 30 showed September 1 inventories of market hogs and animals kept for breeding to be about unchanged from a year ago. Modestly higher farrowing intentions for the December-February quarter, and expected trend increases in litter rates and dressed weights, point to commercial pork production of 21.1 billion pounds next year, an increase of about 2 percent from expected 2005 production. The price of 51-52 percent lean (live equivalent) hogs is expected to average between $43 and $47 per hundredweight (cwt) in 2006.

Quarterly Hogs and Pigs Report: Numbers Largely Steady While Productivity Soars

The Quarterly Hogs and Pigs report, issued by USDA on September 30 (http://usda.mannlib.cornell.edu/reports/nassr/livestock/php-bb/) reported September 1 inventories--market hogs and animals kept for breeding--to be about unchanged from a year ago. The largest positive year-over-year inventory changes reported were the 1-percent increases in the middle weight categories--60-119 pounds, and 120-179 pounds--of the market hogs and pigs breakout by weight groups. The inventory of animals in the 180 pounds and over category was reported to be 2-percent lower than a year ago. Such modest inventory changes--particularly in breeding animal numbers--raise questions in light of the historical tendency of the U.S. pork industry to increase inventories after extended periods of positive returns. The Economic Research Service has reported positive returns in its series of estimated returns for North Central hog farrow to finish operations in 21 of the last 22 months.

The Quarterly Hogs and Pigs report also showed a continuation of increases in litter rates, suggesting that producers may be investing profits in improved reproductive technology, rather than in additional facilities and animal numbers. The September report showed June-August pigs per litter at 9.07, a significant increase from the 9.01 of June-August 2004. The figure below shows that recent litter rates are a continuation of a positive efficiency trend in U.S. hog production.

2006 Pork Production To Increase Almost 2 Percent in 2006

Modestly higher (first) farrowing intentions for the December-February quarter, and expected trend increases in litter rates and dressed weights, point to commercial pork production of 21.1 billion pounds next year, an increase of 1.9 percent from expected 2005 production. With expectations for continued reductions in 2006 U.S.

pork imports (-2.5 percent, year-over-year), increases in U.S. 2006 pork exports (+1.3 percent, year-over-year), and slightly higher per capita consumption of 50.1 pounds (retail basis), the price of 51-52 percent lean (live equivalent) hogs is expected to average between $43 and $47 per cwt in 2006. Retail pork prices next year are expected to decline about 2-3 percent year-over-year. Retail prices are expected to average in the high 2.70s per pound.

Pork Exports Seasonally Lower

U.S. companies exported 199.812 million pounds of pork products in August, a lower quantity than July, but 30 percent larger than August 2004. On a year-to-date basis, U.S. pork exports are running almost 27 percent ahead of the same January- August period last year.

U.S. pork exports usually slow during the summer months when U.S. pork prices typically achieve their annual highs. This year July exports were unexpectedly large when Japan avoided triggering the Safeguard in the first quarter of its (April- March) fiscal year for the first time in 5 years, creating additional demand for imported pork products. U.S. pork exports are likely to accelerate seasonally in the October-September period, when lower domestic prices make U.S. pork products especially attractive to foreign buyers. Total U.S. pork exports of 2.7 billion pounds are expected in 2005, an increase of more than 25 percent over last year.

Live Swine Imports Lower

U.S. imports of Canadian live hogs and feeder pigs in the first 8 months of 2005 were almost 8 percent lower than the same period last year. And although the January through August 2005 average feeder pig share of swine imports is about the same as the same period last year (67.8 percent, versus 67.2 percent for January through August 2004), August import data indicate a much lower percentage of feeder pig imports--64.5 percent of total U.S. swine imports were feeder pigs, versus 68.4 in July 2005, and 68 percent in August 2004. Weekly USDA import data for Canadian swine in September and early October suggest much lower feeder pig import shares--of between 58 and 59 percent, when a proportion in the mid-60s is more typical of summer and fall imports. The National Direct Delivered Feeder Pig report indicates that the average price of early weaned pigs in the first 2 weeks of October was $36.83, almost 8 percent higher than the average for September 2005.

The latest monthly Canadian slaughter data indicate that total slaughter numbers for the first 8 months of 2005 are about equal to the same period last year. On a monthly basis however, Canadian slaughter has been lower since May. The next Canadian Hog Statistics will be issued in November
(http://www.statcan.ca:8096/bsolc/english/bsolc?catno=23-010-X).

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