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Commentary: Hogs and Pigs Report - March 2006
US - Glenn Grimes and Ron Plain comment on the March 2006 Quarterly Pigs and Hogs Report from the USDA. Ron Plain
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The March Hogs and Pigs Report came in a bit more bullish than the trade estimates. The report was modestly more bullish than our estimates.
The total number of hogs and pigs on farms March 1 was up 0.7%, the breeding herd was up 1.4%, and the market herd was up 0.6%. If this report is correct, U.S. hog producers continue to use restraint in building the herd.
The 180 lb. and up market inventories were up 1.7%, but March hog slaughter was up 2.9%. The breeding herd as estimated by USDA is smaller than our estimates which use gilt and sow slaughter data.
The year of 2006 is taking on too many of the characteristics of 2002 for comfort. In 2002, hog prices in the first quarter were the high quarterly average for the year. The first quarter price in 2002 was $4.46 higher than the second quarter, live weight basis. For the last 5 years, the second quarter live price has been $4.58 per cwt. higher than the first quarter.
If slaughter in April-June this year is consistent with the 60-180 lb. market inventory in the March report, there should be some seasonal increase in prices from the first quarter to the second quarter in 2006 but likely less than normal.
Farrowing intentions for both the second and third quarters of 2006 seem low relative to the 1.4% increase in the breeding herd.
The large supplies of beef and even larger supplies of poultry that the U.S. is experiencing because of reduced poultry exports due to bird flu are creating very strong competition for the U.S. consumer's meat dollar.
Pork exports are starting the year with a big bang. Following two years of export growth above 20%, pork exports in January 2006 were up 20.2% from a year earlier. The bird flu now found in several countries is probably helping our pork exports some, even though it is negative to domestic retail pork prices.
Live hog imports from Canada were up 7.4% in January compared to a year earlier. Feeder pig imports were up 10.5% and slaughter imports were up 1.7% compared to January 2005. The increase in feeder pigs was especially expected due to the Canadian tariff on corn imports from the U.S.
Retail pork prices in the January-February period were 2% below 12 months earlier. The total marketing margin for these two months was up 6% from a year earlier. The processor-retailer margin was up over 8% but the packer margin was 2.6% smaller than in January-February 2005. The lower retail price and wider marketing margin resulted in live hog prices to producers being down 19.1% in January-February 2006 compared to these months of 2005.
Slaughter in January-March 2006 was up 2.6% from a year ago and live hog prices were down about 17%. We expect slaughter to be modestly high in the last 9 months of the year if the March 1 market inventories are correct and live hog imports from Canada continue to be larger than in 2005.
Our slaughter and price forecasts for the remainder of the year based on the March report are in Table 4. We certainly hope marketings and slaughter for April-December 2006 do not overrun expectations based on market inventories as much as they did in the first quarter. If they do, our price forecasts are probably too high.
Table 1. Hog Inventories March 1, U.S.
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2006 as % of 2005
Market 100.6
Kept for breeding 101.4
All hogs and pigs 100.7
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Table 2. Market Hogs on Farms March 1, U.S.
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Weight Category 2006 as % of 2005
Under 60 pounds 100.9
60 ? 119 pounds 100.2
120 ? 179 pounds 99.6
180 pounds and over 101.7
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Table 3. Sows Farrowing and Intentions, U.S.
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2005 as % of 2004
September-November 100.0
2006 as % of 2005
December-February 101.2
March-May 100.5
June-August 100.2
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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)
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2000 1 25.039 $39.11 $41.14
2 23.125 47.99 50.43
3 24.097 44.19 46.44
4 25.715 38.33 40.78
Year 97.976 42.41 44.70
2001 1 24.578 $40.77 $42.83
2 23.280 50.21 52.05
3 23.635 48.04 51.05
4 26.469 34.97 37.30 $51.67
Year 97.962 43.50 45.81 n/a
2002 1 24.148 $37.23 $39.43 $54.25
2 24.280 32.77 34.99 50.43
3 25.120 31.09 33.86 49.66
4 26.715 28.52 31.34 46.10
Year 100.263 32.40 34.91 50.09
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 (part. est.) 26.210 $39.60 $42.35 $58.37
2 (projected) 25.015 42 - 45 45 - 48 61 - 65
3 (projected) 25.345 39 - 42 42 - 45 58 - 62
4 (projected) 27.900 34 - 37 37 - 40 51 - 55
Year (proj.) 104.470 38 - 41 41 - 44 57 - 61
2007 1 (projected) 26.600 $34 - 37 $37 - 40 $51 - 55
2 (projected) 25.600 36 - 39 39 - 42 54 - 58
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