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March Quarterly Hogs & Pigs Report Summary

by 5m Editor
31 March 2009, at 9:25am

US - USDA's 1 March Hogs & Pigs Report came in a little more bullish than the trade estimates for the breeding herd but were within the potential sampling error, write Glenn Grimes and Ron Plain.

The breeding herd was down 3 per cent according to the report. The average of the trade estimates was for a 2.1 per cent decline. The market herd and the total herd were down 2.7 per cent based on the USDA estimate. The trade estimate was for the market herd to be down 3.2 per cent and the total herd down 3.1 per cent.

March slaughter on a daily basis from domestic production was down 1.7 per cent and the 180-pound and heavier market hog inventory was down 2.4 per cent. So, slaughter was somewhat larger in March than indicated by the report.

Imports of live slaughter hogs from Canada during December, January, and February were down enough to reduce total US slaughter by 2.2 per cent. Imports from Canada are expected to continue to decline through most of 2009.

The breeding herd was about 1 percentage point smaller than indicated by our gilt and sow slaughter data but was well within the possible sampling error for both sets of data.

The heavier weight market hog inventories in March were larger than indicated by the lightweight market inventories in December. On 1 December the under 60-pound market inventory was down 5.5 per cent from 12 months earlier but the 1 March heavy weight inventory was down only 2.4 per cent.

Demand for pork at the consumer level was up 1.6 per cent for December-February according to our demand index. In fact, demand for both beef and pork at the consumer level was up during this period. Therefore, the financial problems in the US hog industry are due to large supplies and high feed costs rather than weak demand. With current production costs, we are just producing too many hogs to make a profit. Costs are not likely to get much, if any, lower this year than they are now. However, when the general economy starts to improve, it is likely to carry oil prices somewhat higher and corn prices are likely to follow the price of oil.

Retail pork prices in February were down 1.2 per cent from January but were up 4.8 per cent from February 2008. January and February retail pork prices were up 4.9 per cent. Everyone in the pork industry except the packer benefitted from these higher retail prices. In January and February the processor-retailer margin was up 7.4 per cent from 12 months ago and live hog prices were up 5.5 per cent from these months in 2008. However, the packer margin was down 8.6 per cent and deteriorated more in March based on preliminary data.

Pork exports in January were down 8.7 per cent from a year ago and imports were down 1.7 per cent. Net pork exports were 12 per cent of US pork production in January 2009 as compared to 13 per cent in January 2008. That gap is expected to continue to widen through the summer of 2009.

US pork exports in January compared to a year ago were up 20.9 per cent to Japan, up 62.8 per cent to Mexico, down 9.3 per cent to Canada, down 19.9 per cent to South Korea, down 75 per cent to Russia, down 90.1 per cent to mainland China, down 17.8 per cent to Hong Kong, up 70 per cent to Australia, up 74 per cent to Taiwan, and down 7.5 per cent to other countries.

Based on USDA's heavier weight market inventory and the likelihood that slaughter hog imports will be down enough to reduce slaughter by 2 per cent, we are forecasting slaughter for the April-June quarter to be down 4.5 per cent from 2008. This is a somewhat larger slaughter than indicated by the lightweight market inventory on 1 December.

For July-September, we expect slaughter to be down 5 per cent from 12 months earlier. As for the second quarter, we expect slaughter hog imports from Canada to continue to decrease through the third quarter compared to a year earlier.

March-May farrowing intentions indicate slaughter in the fourth quarter will be down near 3 per cent. Some additional decline is likely because of fewer imports from Canada.

USDA's June-August farrowing intentions indicate a 4 per cent decrease from a year earlier. This looks like too much of a decline with the breeding herd down only 3 per cent and the productivity growth experienced in recent years. We expect slaughter from domestic production to be down less than 4 per cent in the first quarter of 2010.

Our estimates of slaughter and prices for the next 4 quarters are in Table 4. Despite a forecasted decline of 4 per cent in hog slaughter, our annual price forecast is similar to last year due to an expected decline in pork exports.

Table 1. Hog Inventories March 1, U.S.
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 2009 as % of 2008
 Market 97.3
 Kept for breeding 97.0
 All hogs and pigs 97.3
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Table 2. Market Hogs on Farms March 1, U.S.
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 Weight Category 2009 as % of 2008
 Under 60 pounds 96.9
 60 - 119 pounds 97.5
 120 - 179 pounds 97.5
 180 pounds and over 97.6
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Table 3. Sows Farrowing and Intentions, U.S.
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 2008 as % of 2007
	 September-November 94.0
 
 2009 as % of 2008
 December-February 97.0
 March-May 97.1
 June-August 96.0
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Table 4. Estimated Commercial Hog Slaughter by Quarter and Live Hog Prices
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 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)
_________________________________________________________________________
 
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 26.684 $41.49 $46.04 $62.69
 2 25.526 48.14 52.55 71.39
 3 26.566 45.07 50.34 69.17
 4 30,396 33.61 39.44 56.83
 Year 109.172 42.08 47.09 65.04
 
2008 1 29.601 $33.86 $39.64 $57.41
 2 27.941 46.68 52.51 72.24
 3 28.696 51.76 57.27 78.05
 4 30.214 37.82 41.92 61.38
 Year 116.452 42.53 47.83 67.27
 
2009 1 (part. est.) 28.515 $37.20 $42.20 $60.40
 2 (projected) 26.700 43 - 47 48 - 52 66 - 71
 3 (projected) 27.250 46 - 50 51 - 55 70 - 75
 4 (projected) 29.300 39 - 43 44 - 48 60 - 65
 Year (proj.) 111.765 41 - 44 46 - 49 64 - 68
 
2010 1 (projected) 27.600 $38 - 42 $42 - 46 $58 - 63
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