WORLD HOG AND PORK PRODUCTION

Last week lean hog prices continued to defy the premise that the tenured ag-economists at the various land grant universities had put forward in May. That was prices in the high 60’s in May would be the high of the year. Iowa-Minnesota lean hog prices last Friday averaged 71.60 ($.53 live a lb). Stronger and higher than most predicted. U.S. hog slaughter last week was 1.888 million down 23,000 head from last years same weeks. 1.911 million producers are still benefiting from over two years of profits. October lean hog futures closed Friday at 64.50 December 61.80. Producers can lock in profits for the rest of the year if they wish. We believed there would be no more market hogs in Canada-USA in 2006 compared to 2005. Year to date combined slaughter 71,346 million down .1%. Its hard to have lower prices without more hogs.

EXPORTS:

U.S. pork exports in June were 15.2% higher than the same month a year ago. World demand for pork remains strong and the competitiveness of the U.S. pork aided in no small part by and devalued U.S. dollar is daunting. U.S. exports should remain strong through the fall, Brazil’s (one of U.S. major pork competitors) prices have reached $.44 U.S. lb. live weight which is up from the mid $.30 not very long ago. The U.S. and Canada have market access advantages to many countries due to Brazils ongoing struggles with foot and mouth disease. Most of the time Brazil has the lowest hog prices in the world. Brazil is the floor price for cheap pork in the world. The higher the Brazil price is ($.44 lb.) the better chance for the sustained profitability in Canada and the USA.

GRAIN:

We are no grain experts but the USDA estimate last week of 2006 11 billion bushel corn crop and a 153 bushel per acre yield projecting the third largest corn crop in U.S. history tells us that feed prices should stay relatively low through the first half of 2007. This augers well for sustained hog profitability through the same time period.

WORLD SWINE PRODUCTION:

There was some interesting data in the July/August Pig International Magazine.

China since 2000 had increased 37 million hogs in inventory. The next 9 largest countries in the world combined increased 13 million. Nothing like having over one billion people who like pork with increasingly disposable incomes.

The total world swine inventory according to the FAO in 2005 was 960.3 million hogs up from 896.4 million in 2000. That would be an increase of almost 60 million head or an increase greater than the U.S. inventory. The US market inventory is less than 7% of the world total or put in another way about 90% of the worlds pigs are not in North America.

IMPLICATIONS:

World pork and pig production continues to grow at an average 3.25% per year (3.27 million tons). People in the world like pork. Demand is increasing. The world’s population continues to increase and have greater disposal income. The world consumers are voting with their money to buy pork. Having a greater market is positive for all of us invested in the swine industry. The continual increase of U.S. pork exports is a logical offshoot of this phenomenon.

With a static per capita consumption in the U.S. it is paramount that our industry continues to take advantage of these marketing possibilities. Thank goodness the Canada – USA packing industry is well capitalized, aggressive and has scale and is efficient. The ability to deliver large volumes of consistent quality product at competitive prices gives our industry a great advantage in the world markets.

Written by Jim Long, Genesus Genetics / Keystone Pig Advancement Inc. - 15th August 2006 - Reproduced courtesy Farms.com

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