There were no big surprises in the June Hogs & Pigs report. It came in very close to trade expectations. The breeding herd was a little smaller than we expected but well within the sampling error.

All hogs and pigs came in at 98 per cent of a year ago, compared to the average of the trade estimates of 98.1 per cent. The breeding herd came in at 97.3 per cent, compared to the trade estimates at 97.6 per cent. The market herd came in at 98.1 per cent, compared to the trade estimates of 98 per cent.

The current problem with low prices is caused by weak demand at the export level and the large supply of pork. Domestic demand at the consumer level was up 1.5 per cent in January-May compared to last year based on our demand index. However, demand for live hogs was down 5 per cent compared to this period last year.

The major problem in the hog industry is not the supply of pork, it is production costs. Corn price near $4 per bushel and soybean meal comparably high have increased the cost of producing pork $12 to $13 per hundredweight compared to 5 years ago. High priced crude oil resulted in high priced gasoline and high ethanol prices resulted in high corn prices relative to the 35 years prior to 2008. In fact, the profit per hog in the second quarter would have been $7 to $12 per head with $2 corn.

Pork exports for the month of April were 21.5 per cent below a year earlier. In April our net export of pork as a percent of total U.S. pork production was 3.9 percentage points less than a year ago. In other words, there was nearly 4 per cent more pork available for U.S. consumers in April 2009 compared to 2008 because of reduced exports. U.S. consumers probably had 5 per cent or more pork available to purchase in May and June 2009 than a year earlier. In July, the supply of pork for U.S. consumption will probably be 3-4 per cent larger than last year because of smaller exports.

Pork exports for the January-April period were down 10.8 per cent this year compared to last year. Pork imports for the first 4 months of 2009 were down 5 per cent from 12 months earlier. Net exports as a percent of production were down nearly 1.4 per cent. Exports to Japan were up 8.5 per cent, to Mexico up 54 per cent, to Canada down 6.8 per cent, to South Korea down 3.9 per cent, to Russia down 47.2 per cent, to China and Hong Kong down 64.2 per cent, to Australia up 40 per cent, to Taiwan up 69.8 per cent, and to other countries down 8.8 per cent.

Imports of live hogs from Canada were down 21.8 per cent in April 2009 compared to 2008. For January through April imports from Canada were down 36 per cent. This indicates the reduction in live hog imports from Canada is slowing.

In the June Hogs and Pigs report, the inventory of 180 lb. and heavier market weight hogs was relatively close to the June slaughter. However, slaughter in the second quarter has been larger than indicated by the March 1 market inventory when one considers the smaller live hog import from Canada. Hog weights indicate marketings were not kept current in the second quarter with a year earlier by at least 2 days and possibly 3 days. Barrow and gilt carcass weights for the most recent week in June were 4 lbs. heavier than last year.

Based on the heavy weight market inventories, slaughter in the third quarter will be about 3 per cent below last year if the inflow of hogs from Canada continues to decline. Even if slaughter is close to expectations based on these inventories, the domestic supply of pork will be equal to last year because of heavier market weights and reduced exports. With the current demand situation, slaughter prices are likely to be in the low to mid-$40s live for 51-52 per cent lean hogs.

Slaughter in the fourth quarter is likely to be down between 3 and 4 per cent from 2008 based on the light weight inventories and fewer Canadian hogs. With smaller exports and heavier weights, we look for 51-52 per cent lean hogs live to average in the low $40's.

The number of pigs per litter for March-May was a record 9.61 head. Pigs per litter have increased by an annual rate of 2.4 per cent for the last 4 quarters.

The report shows farrowing intentions are down 3.3 per cent for June-August. With productivity growth, slaughter is not likely to be down 3.3 per cent. Also a 3.3 per cent decline in farrowings for June-August looks low with the breeding herd down only 2.7 per cent. Farrowing intentions for September-November show a decline of 2.2 per cent from 2008. Again, considering productivity growth, the supply of pork available will likely be close to last year.

The bottom line is that the June Hogs and Pigs report confirms our belief that producers need to reduce the breeding herd another 5 per cent or more to get the industry profitable.

Our estimates of slaughter and prices for the next four quarters are in Table 4.

Table 1. Hog Inventories June 1, U.S.
______________________________________________________________
 
 2009 as % of 2008
 Market 98.1
 Kept for breeding 97.3
 All hogs and pigs 98.0
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Table 2. Market Hogs on Farms June 1, U.S.
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 Weight Category 2009 as % of 2008
 Under 60 pounds 97.6
 60 - 119 pounds 98.0
 120 - 179 pounds 97.6
 180 pounds and over 99.9
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Table 3. Sows Farrowing and Intentions, U.S.
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 2009 as % of 2008
 December-February 97.0
 March-May 97.3
 June-August 96.7
	 September-November 96.8
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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)
_________________________________________________________________________
 
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 28.488 $36.92 $42.11 $60.43
 2 (part.est.) 27.042 37.80 43.25 61.78
 3 (projected) 27.775 36 - 40 43 - 47 60 - 65
 4 (projected) 29.195 32 - 36 40 - 44 56 - 61
 Year (proj.) 112.500 36 - 38 42 - 44 60 - 62
 
2010 1 (projected) 27.625 $35 - 39 $41 - 45 $58 - 63
 2 (projected) 26.250 39 - 44 45 - 49 64 - 69
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