Statistics Canada released Canada’s Swine Inventory for 1 October last week.

The Canadian breeding herd is steady at 1.308 million while the market hog inventory has gained about 100,000. The bottom line: steady as she goes.

Look at 2004: since then Canada’s breeding herd has dropped 320,000 while the market hog inventory is down about 2.5 million. The strength of the Canadian dollar, Country of Origin Labeling (COOL), high feed prices, and Government buy-out scheme have significantly cut production.

The steady as she goes applies to Canadian pigs to USA, basically no change year over year. The bottom line:

The financial scenario in Canada’s swine industry will in our opinion not encourage any expansion in the near future. No new sow barns are being built. There are some existing empty sow units that will be refilled over the next two years as they come out of the Government buy out. We expect what comes back into production will probably be countered by older barns going out of production.

Continental Inventory

In conjunction with the release of Canada’s Swine Inventory the USDA prepares a USA–Canada combined inventory.

Hogs and Pigs Inventory Number by Class and Quarter – United States and Canada

The total supply of USA–Canada statistics tell us there is no indicators showing increased hog supply. A handful more sows, a handful more market hogs, and a bit larger pig crop is no indicator of any expansion. We expect hog prices will continue strong over the coming months. Supply is not the issue. Demand is everything.

Chicken Little Economists

We are accused of being optimistic and we are certainly not Chicken Little Economists. Last week, in the North American Review, Dr Steve Meyer economist listed potential 'sky is falling' scenarios.

His list:

• A trade disruption that would leave any significant portion of the 22 per cent or so of US production that will be exported this year.
• Something that negatively impacts US consumer level pork demand.
• Output growth of four per cent or more and maybe even less, depending on the 2012 corn crop
• Insufficient slaughter capacity in the fourth quarter 2012.

Of course, Dr Meyer is right – these are all points that could impact our industry. It’s good to be aware of what might go wrong. Be prudent.

We see differently, we do not dwell on what might go wrong. We are all descendents of immigrants that came here with little but optimism. Over generations, a next to vacant land has been built into the world’s largest economy, the world’s most innovative with the world’s best productivity. A society that looks ahead not quivering from what might go wrong. The sky is falling!!

Personally, having travelled to 38 pig-producing countries, I find it defeatist to think anything but that we can compete in the world. We have capital, expertise and infrastructure from production to packing – second to none.

Our perspective to Dr Meyer's points:

• The world wealth is growing. They want meat protein – this leads to more pork exports, not less.
• Pork is the safest meat product. No E. coli scares, no salmonella scares. Consumers have more fear of cantaloupes.
• In 2012, every acre will be planted for corn, wheat and soybean in the US and the world. One of 10 years, there are US crop failures. You go broke betting on crop failures (corn in China $9 per bushel last week).
• More hog output of four per cent by fall 2012? The September sow herd is the one bred for next fall. Four per cent increase will not happen from a ½ of one per cent greater sow herd.
• Half of one per cent more sows on 1 September will never produce enough hogs to overwhelm US packer capacity next fall. The fear of 1998 is a red herring.

One other note:

• We have been writing for a couple of years about the huge increase in planted grain acres in the world. High prices have led to more wheat acres. The International Grains Council projects the world’s wheat inventories the highest in 10 years at 684 million tons. December wheat closed at $6.23 last Friday. That is down over $3.00 ($9.65) a bushel from the high earlier this year. Wheat at $6.23 will help keep the corn price down. Wheat can and will feed pigs as a substitute ingredient. As it is said: ‘Surest cure to high prices is high prices.’