ShapeShapeauthorShapechevroncrossShapeShapeShapeGrouphamburgerhomeGroupmagnifyShapeShapeShaperssShape

Grimes & Plain on the Hogs and Pigs Report

by 5m Editor
3 July 2007, at 1:55pm

US - The June 1 Hogs and Pigs Report came in close to trade expectations, but a bit on the higher side.

The total number of hogs and pigs on farms June 1 was up 1.7% according to USDA. The pre-release trade expectation was 1.4%. The market herd was up 1.8% according to USDA, the trade estimate was up 1.3%; and, the breeding herd was up 0.9% according to USDA but the trade estimate was up 0.5%.

The number of hogs slaughtered in June on a daily basis was up about 4%; the number of 180 lb. and heavier market hogs on June 1 according to USDA was up 3% (Table 2). Slaughter during the second quarter was 2% larger than we estimated it would be based on the March Hogs and Pigs report. We do not believe the increase in the second quarter slaughter was due to pulling marketings forward. For most weeks this past year barrow and gilt weights in Iowa-Minnesota were below a year earlier. For the 4-week period ending June 23 barrow and gilt weights were above last year.

USDA's heavier weight market hog inventories indicate third quarter 2007 slaughter will be up 1.4%. We are estimating a 2.4% increase for the quarter and that may be low based on second quarter actuals. For the fourth quarter, USDA's light weight market inventory indicates a 1.8% increase in slaughter from last year. We are increasing the estimated slaughter to 2.8%.

One reason we have increased our slaughter estimate an extra 1% for the last half of 2007 is the expectation that slaughter hog imports from Canada will be up from 2006. Another reason for a substantial increase in slaughter in the last half of 2007 compared to 2006 is the larger supply of circovirus vaccine available this year than last and thus we expect lower death loss. Another reason to increase some is that slaughter in recent quarters has been some larger than expected based on the Hogs and Pigs reports. As indicated earlier, the second quarter 2007 slaughter was 2% larger than we expected based on the March report.

Another reason to increase slaughter in coming quarters relative to the June report is that hog producers of all sizes reported pretty aggressive increases in marketings for 2007 in the hog structure study we have just completed.

The breeding herd increase of 0.9% from last year is consistent with our barrow and gilt slaughter sample and cull sow slaughter.

Consumer demand for all meats except broilers was positive for the first 5 months of 2007 compared to 2006. Consumer demand for pork was up 0.6% for January-May, beef was up 1.1%, turkey was up 3.8%, but broiler consumer demand was down 3.5% for the first 5 months of 2007 compared to a year earlier.

The demand for live hogs and live fed cattle shows substantial growth in January-May compared to 12 months earlier. Live hog demand was up 3.8% and live fed cattle demand was up 4.7%.

Retail pork prices in May were up 2.2% from April and up 3.9% from a year ago. All of the increase in retail prices plus some was bid into live hog prices. Live hog prices in May were 11% above a year ago. Live hog prices for January-May 2007 were up 10.3% from 2006. The available data indicates the stronger live hog demand is due to higher retail prices and lower marketing margins which were down 1.4% in January-May compared to 12 months earlier.

Pork exports in April were down 12.4% from a year earlier. For January-April pork exports were down 1.0% from this period a year ago. Pork exports for January-April were up 12.5% to Japan, up 1% to Canada, down 24.3% to Mexico, down 17.4% to Russia, up 7.9% to South Korea, up 31.9% to mainland China and Hong Kong, down 47% to Taiwan, down 33.9% to the Caribbean, and up 6.6% to "other." The big decline for the first 4 months of 2007 was in exports to Mexico which were down over 52 million pounds from 12 months earlier.

Pork imports for January-April were down 4.2% from last year. The U.S. net exports of pork declined from 9.89% of production last year to 9.73% of production this year for January-April. The data indicate pork trade in 2007 is slightly negative to live hog demand.

Live hog demand appears to be cycling. From late 1999 to late 2000 there were 13 months of growth in demand for live hogs. From late 2000 to late 2001 there was mixed demand action but losses most of the time for 12 months, then there were 17 months of losses. From mid-2003 to mid-2005 there were 26 months of growth. This growth period appeared to be associated with the popularity of high protein diets. Following the 26 months of growth, there were 14 months of losses in live hog demand. For the last 11 months, there has been growth in live hog demand. A part of these fluctuations in demand for live hogs was probably tied to pork exports.

According to USDA, farmers planted 92.89 million acres to corn this year. This is up 2.43 million acres from the March intentions of 90.45 million acres and up 14.56 million acres from the planted acres in 2006. With a normal yield of corn this year, corn prices in the first half of 2008 may be less or no higher than the first half of 2007. The futures price closes on Friday for corn showed prices of $3.64 to $3.95 per bushel in 2008.

Soybean acreage according to the June report showed 64.1 million acres this year, down 15% from last year. The futures market on Friday showed $0.36 to $0.40 per bushel gains in price for 2008 from the Thursday close.

First quarter 2008 slaughter based on the June-August farrowing intentions will be up 1.6% from this year. We expect pigs per litter to increase and are pushing the first quarter slaughter up to 2.4% from the first quarter of 2007.

For the second quarter 2008 slaughter the September-November farrowing intentions are for a 0.4% increase. We are pushing our second quarter slaughter estimate up 1% from this year.

Our price estimates by quarter in Table 4 assume we will hold most of the gains in live hog demand of the last year.

Table 1. Hog Inventories June 1, U.S.
______________________________________________________________

 2007 as % of 2006
 Market 101.8
 Kept for breeding 100.9
 All hogs and pigs 101.7
______________________________________________________________

Table 2. Market Hogs on Farms June 1, U.S.
______________________________________________________________

 Weight Category 2007 as % of 2006
 Under 60 pounds 101.8
 60 - 119 pounds 101.5
 120 - 179 pounds 101.2
 180 pounds and over 103.0
______________________________________________________________

Table 3. Sows Farrowing and Intentions, U.S.
______________________________________________________________

 Weight Category 2007 as % of 2006
 Under 60 pounds 101.8
 60 - 119 pounds 101.5
 120 - 179 pounds 101.2
 180 pounds and over 103.0
______________________________________________________________


Table 4. Estimated Commercial Hog Slaughter by Quarter and Live Hog Prices
___________________________________________________________________________

 Commercial Terminal Mkt. 51 52% Lean Non packer sold
 Slaughter Barrow & Gilt Hogs Hogs (avg. net
Period (mil. hd.) (price/cwt) (price/cwt) carcass price/cwt)
___________________________________________________________________________

2001 1 24.578 $40.77 $42.83
 2 23.280 50.21 52.05
 3 23.635 48.04 51.05
 4 26.469 34.97 37.30 $51.67
 Year 97.962 43.50 45.81 n/a

2002 1 24.148 $37.23 $39.43 $54.25
 2 24.280 32.77 34.99 50.43
 3 25.120 31.09 33.86 49.66
 4 26.715 28.52 31.34 46.10
 Year 100.263 32.40 34.91 50.09

2003 1 24.654 $33.32 $35.38 $50.40
 2 23.922 39.86 42.64 58.92
 3 24.747 38.66 42.90 59.27
 4 27.608 34.15 36.89 52.36
 Year 100.931 36.50 39.45 55.25

2004 1 25.717 $40.82 $44.18 $60.56
 2 24.737 51.56 54.91 72.74
 3 25.817 53.72 56.58 74.73
 4 27.192 50.58 54.35 71.58
 Year 103.463 49.17 52.51 69.90

2005 1 25.538 $48.46 $51.92 $69.33 
 2 25.030 49.08 52.09 70.25 
 3 25.528 46.72 50.51 68.37
 4 27.486 42.20 45.54 61.68
 Year 103.582 46.62 50.02 67.43

2006 1 26.208 $39.23 $42.63 $58.37
 2 24.839 45.81 48.45 65.96
 3 25.810 46.92 51.83 69.13
 4 27.880 41.56 46.13 62.04
 Year 104.737 43.38 47.26 63.86

2007 1 26.686 $41.49 $46.04 $62.69
 2 (part. est.) 25.514 48.40 52.30 71.35 
 3 (projected) 26.425 44 - 47 48 - 51 64 - 68
 4 (projected) 28.665 40 - 43 44 - 47 59 - 63
 Year 107.290 43 - 45 47 - 49 64 - 67

2008 1 (projected) 27.326 $42 - 46 $46 - 51 $63 - 69
 2 (projected) 25.770 44 - 48 48 - 53 66 - 71
___________________________________________________________________________

5m Editor