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September Quarterly <em>Hogs & Pigs</em> Report Analysis

by 5m Editor
28 December 2011, at 5:39am

US - USDA's December Hogs and Pigs Report said the market hog inventory was slightly larger than pre-release trade forecasts and the breeding herd was slightly smaller, writes Ron Plain.

USDA said the market inventory was up 1.7 per cent and kept for breeding was up 0.4 per cent. USDA's estimate of the total number of hogs and pigs on US farms at the start of December was 1.5 per cent larger than 12 months earlier. (See Table 1 below) The average of the pre-release trade estimates was for a 1.3 per cent increase in both the market hog inventory and total inventory and a 0.8 per cent increase in the swine breeding herd.

USDA made some upward revisions to past inventory estimates to bring them more in line with fall hog slaughter. USDA raised their previous estimate of the June market hog inventory by 620,000 head (1.1 per cent), raised their September market hog inventory estimate by 145,000 head (0.2 per cent), increased the reported number of sows farrowed during March-May 2011 by 1.4 per cent and increased the March-May pig crop by 400,000 head (1.4 per cent).

The December swine breeding herd is 3,000 head smaller than on 1 September. This is the first quarter-to-quarter decline since September 2010. In 2010, the December breeding herd inventory was 8,000 head larger than on 1 September. This year it was 3,000 head smaller. Thus, USDA says the breeding herd declined by 11,000 head this fall compared to last. September-November sow slaughter was up by 32,000 head compared to a year ago. Imports of Canadian sows for slaughter was up by 9,000, leaving 23,000 more US sows slaughtered this fall than last. The USDA data implies 12,000 more gilts were added to the breeding herd this fall than last.

USDA said fall (September-November) farrowings were up 0.5 per cent. They forecast winter farrowings to be up 0.8 per cent and spring farrowings to be down 0.9 per cent compared to 12 months earlier. (See Table 3) Fall farrowings were 0.6 per cent greater than trade expectations. USDA's forecast of winter farrowings is 0.3 per cent higher than expected, but spring farrowing intentions are 1.7 per cent below the trade forecast. Farrowings during September-November were above the year-earlier level for the first time since March-May 2008. USDA says the breeding herd is up 0.4 per cent, but the number of litters to be farrowed in the next six months will be down 0.1 per cent. History shows farrowing intentions to be a better predictor of future hog slaughter than is the breeding herd inventory.

The number of pigs per litter during September-November, 10.02 head, was up 1.3 per cent from a year ago but slightly below the record set in the previous quarter. The trade was expecting a 1.6 per cent increase. Fall farrowings were up 0.5 per cent; but with 1.3 per cent more pigs per litter, the fall pig crop was up 1.8 per cent.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on 1 December was down 0.6 per cent compared with 12 months earlier. (See Table 2) However, it looks like daily barrow and gilt slaughter in December will be up more than1 per cent. The 120-179 pound market hog group was up 2.0 per cent from December 2010. The 50-179 pound inventory was up 2.3 per cent; and the inventory of pigs weighing less than 50 pounds was up 2.2 per cent compared to a year earlier.

Live animal imports from Canada during the September-November quarter showed feeder pigs up 7.5 per cent and slaughter hog imports down 10.3 per cent despite an 8.4 per cent increase in imports of sows for slaughter. Imports of Canadian hogs and pigs for 2010 totaled 5.7 million head. Look for 2012 imports to be close to that same level.

Based on the 50-179 pound market hog inventory and the expectation of little change in live hog imports, our forecast is for an increase of 2.1 per cent in first quarter 2012 daily hog slaughter. With this level of pork production, we expect 51-52 per cent lean hogs to average close to $64 live and Iowa-Minnesota negotiated sales to average close to $84/cwt on a carcass weight basis.

For the second quarter of 2012 we expect daily hog slaughter to be up 2.3 per cent with 51-52 per cent lean hogs averaging close to $69 live and Iowa hogs averaging in the low $90s/cwt on a carcass basis.

With the number of litters farrowed expected to be up 0.8 per cent this winter and pigs per litter increasing by 1.5 or so, the winter pig crop is likely to be well above a year earlier. We are forecasting third quarter 2012 daily slaughter to be up 2.3 per cent compared to a year ago. Look for carcass prices of barrows and gilts to average in the low $90s/cwt. Slaughter weights are likely to average 0.5 per cent higher next fall.

The forecast 0.9 per cent decrease in spring farrowings should be supplemented by an increase in litter size to yield a spring pig crop 1.0 per cent above a year-earlier causing fourth quarter 2012 hog slaughter to be up 1.0 per cent on a daily basis, but actually 2.6 per cent higher than during October-December 2011 because of 1 more slaughter day.

We are predicting hog slaughter during the fourth quarter of 2012 to be above 30 million head. That is a level that could put serious pressure on slaughter capacity and thus force a drop in hog prices. Our estimates of slaughter and prices for the next four quarters are in Table 4. We are counting on tight supplies of competing meats to support average annual hog prices at 2011 levels despite slightly more than a 2 per cent increase in pork production.

Table 1. Hog Inventories 1 December, US ______________________________________________________________ 2011 as % of 2010 All hogs and pigs 101.5 Kept for breeding 100.4 Market hogs 101.7 ______________________________________________________________ Table 2. Market Hogs on Farms December 1, US ______________________________________________________________ Weight Category 2011 as % of 2010 Under 50 pounds 102.2 50 - 119 pounds 102.3 120 - 179 pounds 102.0 180 pounds and over 99.6 	Pig Crop 	 September-November		 101.8 ______________________________________________________________ Table 3. Sows Farrowed and Farrowing Intentions, US ______________________________________________________________ 						 2011 as % of 2010 	 December-February				 99.0 	 March-May 2011					 99.6 	 June-August 2011				 98.5 	 September-November 2011			 100.5 					 	 2012 as % of 2011 	 December-February				 100.8 	 March-May					 99.1 ______________________________________________________________ Table 4. Commercial Hog Slaughter and Barrow and Gilt Price by Quarter ______________________________________________________________________________________ --Comm. Slaughter-- ------Barrows & Gilts, price/cwt------ Change 51-52% Iowa-Minn Non-packer-sold Year & Million from Lean Base Net Quarter Head Year ago Live Carcass Carcass _________________________________________________________________________ 2006 1 26.208 + 2.6% $42.63 $56.38 $58.37 2 24.839 - 0.8 48.45 65.27 65.96 3 25.810 + 1.1 51.83 68.04 69.13 4 27.880 + 1.4 46.13 60.53 62.04 Year 104.737 + 1.1 47.26 62.54 63.86 2007 1 26.684 + 1.8% $46.04 $59.90 $62.69 2 25.526 + 2.8 52.55 69.45 71.39 3 26.566 + 2.9 50.34 66.14 69.17 4 30.396 + 9.0 39.44 52.08 56.83 Year 109.172 + 4.2 47.09 61.91 65.04 2008 1 29.601 +10.9% $39.64 $52.49 $57.41 2 27.941 + 9.5 52.51 70.43 72.24 3 28.696 + 8.0 57.27 75.67 78.05 4 30.214 - 0.6 41.92 55.60 61.38 Year 116.452 + 6.7 47.83 63.58 67.27 2009 1 28.503 - 3.7% $42.11 $57.23 $60.43 2 27.072 - 3.1 42.74 57.32 61.76 3 28.428 - 0.9 38.90 51.43 56.68 4 29.615 - 2.0 41.20 54.98 57.64 Year 113.618 - 2.4 41.24 55.23 59.11 2010 1 27.630 - 3.1% $50.41 $66.81 $68.32 2 26.074 - 3.7 59.60 79.04 79.42 3 26.930 - 5.3 60.13 79.44 80.70 4 29.626 + 0.1 50.11 65.21 69.26 Year 110.260 - 3.0 55.06 72.62 74.47 2011 1 27.486 - 0.5 $59.94 $79.28 $80.63 2 26.113 + 0.2 68.80 91.80 92.39 3 27.374 + 1.6 71.06 94.03 95.74 4* 29.819 + 0.7 65.10 85.22 87.68 Year* 110.791 + 0.5 66.23 87.58 89.12 2012 1** 28.060 + 2.1 $62 - 66 $82 - 86 $84 - 88 2** 26.700 + 2.3 67 - 71 89 - 93 91 – 95 3** 27.560 + 0.7 67 – 71 89 – 93 91 - 95 4** 30.600 + 2.6 58 – 62 77 – 81 79 - 83 Year** 112.920 + 1.9 63 – 67 84 – 88 86 - 90 *estimated **forecast _________________________________________________________________________