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June Quarterly Hogs & Pigs Report Summary
US - USDA’s June Hogs and Pigs inventory report came in more bearish than the average of the trade estimates, write Glenn Grimes and Ron Plain.
Ron Plain
The total number of hogs and pigs on farms June 1 was up 5.8% over a year ago (Table 1) while the trade estimates averaged a 4.6% increase. The breeding herd was down 0.8% according to USDA and the trade estimates showed a 1.4% reduction. The market herd was up 6.5% according to USDA and the trade estimates were for a 5.1% increase.
Marketings of U.S. raised hogs during June were fairly consistent with the 10.2% increase in the inventory of 180 lb. and heavier market hogs on June 1 (Table 2).
USDA’s breeding herd estimate was larger based on their sampling method than indicated by our gilt and sow slaughter data. We have little confidence in the accuracy of the USDA’s breeding herd estimate. USDA revised their March inventory for the market herd and total herd upward, but did not revise their breeding herd estimate. USDA’s unrevised March breeding herd figure indicates tremendous growth in productivity for the last 12-18 months.
Demand continues to be a bright spot for the hog industry. In the January-May period our demand index for pork at the consumer level was up a modest 1.2% but demand for live hogs was up between 6 and 8%.
The big growth in live hog demand was fueled by pork exports which were up almost 96% in April from a year ago, and up over 52% for the first 4 months of the year. Our net export of pork as a percent of U.S. production was 15.6% in January-April 2008, up from 9.7% a year ago.
Live hog imports from Canada were up nearly 20% in January-April but trailed off in May and June – especially imports of slaughter hogs. For the last half of 2008, we expect imports of slaughter hogs from Canada to be less than a year ago.
The value of pork and pork byproducts exported in April amounted to $34.58 per hog slaughtered. For January-April, pork and pork byproduct value was $31.20 per hog slaughtered.
Retail prices for pork in January-May were up 1.2% from a year ago. All of the increase in price, plus some, was bid into the marketing margin which was up 5.8% from last year. The processor-retailer margin was up 5.6% and the packer margin was up 6.3%. Live hog prices to producers were down 9% but, with an 11% increase in production, that was an excellent performance from the demand side. We believe hog prices in January-May would have been at least 15% lower if there had been no growth in live hog demand.
Slaughter in the third quarter of 2008 is expected to be up over 8% from a year ago, based on the heavier weight market inventories in the June report. The slaughter level in the third quarter will be larger this year than last due in part to an additional weekday for slaughter in 2008. With stable demand from the first half of 2008 to the last half, we expect the price for 51-52% lean live hogs to be in the upper $40 to low $50.
The lightweight market hogs inventories on June 1 point to a slaughter level in the fourth quarter that is up 2.6% from 2007. Both our third and fourth quarter slaughter estimates in Table 4 have been reduced because of an expected smaller number of slaughter hog imports from Canada.
Farrowing intentions for June-August point to a slaughter level in the first quarter of 2009 that is down slightly from 2008 (Table 3). With this level of pork production and stable demand, we expect live 51-52% lean hogs to be in the mid-$40s.
Farrowing intentions for September-November are 96% of a year earlier. With a 2% increase in productivity and a reduction of about 1% because of fewer slaughter hog imports from Canada, we are projecting a 3% smaller slaughter in the second quarter of 2009 than in 2008. Again, with stable demand and this level of slaughter, we expect a price for 51-52% lean live hogs in the mid to upper $50s.
A wise strategy for hog producers who plan to stay in the hog business is to try to minimize losses in the next 12-18 months. Even though the current futures market prices will not permit very many hog producers to lock in a profit with current feed prices, it will permit the good hog producers to keep losses quite low.
The futures market close on June 27 offered prices that will require substantial demand growth or substantially smaller marketings than indicated by the USDA’s June report.
Our estimates for slaughter and prices by quarter for the next year are in Table 4.
Table 1. Hog Inventories June 1, U.S.
______________________________________________________________
2008 as % of 2007
Market 106.2
Kept for breeding 99.2
All hogs and pigs 105.8
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Table 2. Market Hogs on Farms June 1, U.S..
______________________________________________________________
Weight Category 2008 as % of 2007
Under 60 pounds 103.7
60 - 119 pounds 105.8
120 - 179 pounds 109.5
180 pounds and over 110.8
______________________________________________________________
Table 3. Sows Farrowing and Intentions, U.S.
______________________________________________________________
2008 as % of 2007
December-February 105.6
March-May 101.9
June-August 98.0
September-November 96.0
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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)
_________________________________________________________________________
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 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 109.176 42.08 47.09 65.04
2008 1 29.597 $33.86 $39.64 $57.41
2 (part. est.) 27.917 $47.20 $52.52 $72.24
3 (projected) 28.800 43 - 47 48 - 52 66 - 72
4 (projected) 31.200 35 - 39 40 - 44 55 - 61
Year (proj.) 117.514 40 - 54 55 - 60 75 - 79
2009 1 (projected) 29.300 $37 - 41 $43 - 47 $60 - 66
2 (projected) 27.100 49 - 54 55 - 60 75 - 79
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Further Reading
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- | You can view the full USDA Quarterly Pigs and Hogs Report - June 2008 by clicking here. |
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