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Ron Plain

Hog slaughter this week was estimated at 2096 thousand head --- up 6.1% from a year earlier. This is the 2nd largest weekly slaughter in January on record. The record was set in 1999.

Slaughter continues to run well above expectations. For the 3 weeks ending in January, slaughter has been up 4.8%.

Larger slaughter imports from Canada probably account for around 1.5 percentage points, but this only accounts for about 30% of the increase. Evidence is building each week that the December market inventories were underestimated.

Preliminary data indicates productivity growth of the U.S. sow herd was 5.7% in the September - November quarter of 2003. Slaughter indicates the June - August productivity growth may also have been quite good.

With these big slaughter levels, prices are not improving during January as they usually do.

Top live hog prices this Friday morning were mixed compared to last week. There prices were $1 lower to $2 higher compared to 7 days earlier. The top live prices this Friday morning for select markets were: Peoria $35, St. Paul $37.50, Sioux Falls $38 and interior Missouri $33.25.

The average prices by area for 185-pound carcass with 0.9-1.1 inch back fat 6 sq. inch loin 2 inches deep were also mixed compared to a week earlier. These prices by area for this Friday morning were: western Cornbelt $50.96, eastern Cornbelt $49.60, Iowa-Minnesota $51.20 and nation $50.35.

Both live cattle and beef prices rallied this week from a week earlier. In fact, yield 3 choice beef at $142.19 per cwt at noon this Friday was record high with the exception of 2003 after the cow with BSE was found in Canada. These strong beef and cattle prices are good news for the hog industry.

Pork exports for January - November of 2003 were up 6.3% from a year earlier. The probabilities are near 100% that 2003 was the 12th consecutive year with record pork exports. During this period pork exports have grown at a compacted percentage rate of almost 15%.

The bad news for producers is that pork imports grew at a rate of over 12% for these 11 months of 2003 compared to 2002. The U.S. has been a net exporter of pork now for 9 consecutive years.

Even though we exported around 275% more pork in 2003 than in 1993 and producers had reduced the breeding herd by nearly 17% on December 1 2003 from 10 years earlier, pork production in 2003 was up nearly 17% from 1993.

Productivity growth of the breeding herd is good for both producers and consumers in the long run, but in the short run, productivity growth faster than demand growth with a production structure that makes reducing the breeding herd difficult, is bad for producers.

Live hog imports from Canada for January - November were at 6,674,719 head. The probabilities are near 100% that total live hog imports from Canada in 2003 exceeded 7 million head. Feeder pig imports for the 1st 11 months of 2003 were up almost 42% from a year earlier. Slaughter hog imports for January - November were up less than 1%, but were down substantially in the 1st half of the year and up substantially in the last half of 2003.