While the markets focused on the extent to which the US breeding herd inventory was reduced, there are several other interesting items in this report that support the continued structural and productivity changes in the US and US/Canada industries.

Before commenting on these changes, here are the inventory numbers for the top states, in rank order:

The biggest decline in inventory for the leading states occurred in South Dakota, where the market hog inventory was only 91 per cent of the 2008 number. It is interesting to note that while pig numbers declined in South Dakota, a state with a sparse human population, numbers increased in Indiana, Michigan, Ohio and Pennsylvania, states with much denser human populations.

In reports for the past several years, the breeding herd in North Carolina was very stable at 1.00 to 1.03 million head. On December, the North Carolina breeding inventory was estimated at 930 thousand head, the smallest breeding inventory since the 1 December 1995 report. The North Carolina breeding inventory represents 15.9 per cent of the US breeding herd. The last time the North Carolina percentage was this low was on 1 October 1999.

There have been 2 bankruptcies filed in North Carolina by relatively large systems and their problems, along with the announced cutbacks by Smithfield most likely account for much of this decline.

Even with the decline in the breeding herd, North Carolina continues to wean more pigs than any other state and weaned 17.8% of all pigs in the US for the previous 12 month period.

Illinois continues to remake itself as a state that exports weaned pigs to surrounding states, most often Iowa and Indiana. Illinois now has 8.2 per cent of the US breeding herd and farrowed 8.3 per cent of the US 12 month pig crop.

The biggest decline in farrowing intentions for the December thru February period occurred in Texas, where they report an intention to farrow only 61 per cent as many sows as the same period last year versus the 98 per cent US intention. Much of this decline is most likely related to the closure of the Smithfield Premium Standard production system located in the panhandle of Texas.

The increase in breeding herd productivity is remarkable. There are several ways to examine this number. The simplest is to divide the market inventory by the breeding herd inventory. Since the 1 March 1988 report, this number has grown from 6.35 market pigs per breeding animal to 10.25 pigs per breeding animal in the 1 December 2009 report.

Some of the increase in inventory is most likely related to the influx of Canadian born feeder pigs. However, that number has declined dramatically. As of the week ending on 19 December 2009, there were 4,986,274 Canadian born feeders imported into the US, compared to 6,979,906 for the same period in 2008, or a 28.6 per cent decline.

Barrows and gilts imported for slaughter declined even more dramatically, going from 1,633,707 in the 2008 period to 516,639 in the 2009 period. There was almost no change in the number of cull sows and boars imported into the US for slaughter.

Another piece of evidence for the productivity increase in the US and Canada herd is the combined North American inventory based on the 1 September 2008 US and October 1, 2008 Canadian numbers. The combined breeding herd declined 6.7 per cent from its high on Dec/Jan 07-08 while the market inventory only dropped 3.7 per cent. These declines occurred after the spike in the market inventory in the summer and fall of 2007 associated with the widespread adoption and use of circovirus vaccines.

US producers appear to have a positive outlook on the future profitability, as evidenced by the recent upturn in SEW and feeder pig prices. Cash prices paid for SEW pigs are now higher than contract prices. Cash prices for 40 pound feed pigs have risen sharply and are approaching contract prices.

Further Reading

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You can view the full report by clicking here.

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You can view the full USDA Quarterly Hogs and Pigs Report - December 2009 by clicking here.