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Canada-USA Breeding Herd Inventory Declines

by 5m Editor
8 May 2007, at 5:31pm

CANADA - With the release of Canada’s April 1st swine inventory, a snapshot of the continental pig supply is clarified. With bilateral pig flow and pork movement, this combined inventory is the most relevant indicator of continental supply.

The combined US-Canada breeding inventory is down 19,000 from last quarter. The first decline in two years. We expect to see further declines in the months ahead.

Breeding Herd
United States and Canada
(Thousand head)
March Jan March
2006 2007 2007
7,663 7,712 7,693


Market Supply and Pig Crop

United States and Canada (Thousand head)
2005 2006 2007
Market 66,838 67,239 67,531
Pig Crop 33,773 34,061 34,323

The combined US-Canada market hog and pig crop reports indicate about 300,000 more head than a year ago. The market inventory would translate into slightly more than 10,000 head more a week coming to market in the next six months compared to a year before. When you consider Canada-USA’s combined weekly slaughter is most of the time circling 2.4 million, 10,000 a week more is a positive supply price driver.

Fewer sows and slightly more hogs are positive for prices through 2007. High feed prices never make more hogs and this cycle appears to be no different than any in the past. With solid domestic pork demand, increased pork exports and plentiful packer capacity, we continue to believe US lean hog prices will exceed 80¢ this summer.

Canada

Many factors continue to affect the Canadian market. These include:
  • A Canadian dollar worth more than 90¢ US (compared to 75¢ a couple of years ago).

  • Moratorium on new swine buildings in Manitoba and Quebec.

  • Difficulty to find competitive labour in Alberta and Saskatchewan due to the oil industry in the region.

  • Packer restructuring – the two largest Olymel and Maple Leaf are each looking at decreasing costs and shackle space (e.g. The Maple Leaf plant in Saskatchewan which slaughters 20,000 a week is due to close June 1st).

  • Disease challenges from circo-virus, mainly in Eastern Canada.

  • High feed prices erode producer margins.
Hogs and Pigs Inventory by Class and Quarter - Canada
Thousand Head
April Inventory 2006 2007 2007 as % of 2006
Kept for breeding 1,638 1,612 98
Market 12,938 12,509 97
Pig Crop 8,400 8,239 98

Two percent fewer sows, three percent fewer markets and a two percent smaller pig crop is an indication of contraction. We expect further decline in these categories going forward as Canadian packers close and the economics of better US returns lead to continental increases in Canadian small pig and market hog exports to the US.

The movement of Canadian pigs to the US is mostly positive for all producers. The small pig movement is supplying US finishers that would otherwise be looking at building sow units - that itself would increase continental supply. Canadian market hogs to the US are keeping US packers near capacity, pushing down their costs and providing product for export. For Canadian producers, every pig that leaves Canada is one less to drive down domestic prices and one less to chase ever decreasing shackle space.

5m Editor