CME: Growing Productivity in US Pork Industry28 June 2012
US - Markets were relatively stable on 12 June when USDA’s Crop Production and World Agricultural Supply and Demand Estimates were released amid ongoing electronic trading, write Steve Meyer and Len Steiner.
those reports included any major surprises relative to trade expectations.
12 June, though, was before hot, dry conditions injected a
huge dose of volatility into grain markets. Friday morning may be
It is important to note that the livestock markets have had ongoing electronic trading at the time of major releases (Hogs and Pigs, Cattle on Feed, etc.) for some time. It has not been too problematic but that may mean that there has just been little “unexpected” information in the reports.
We frequently mention growing productivity in the US pork industry but do not often stop to consider the various components of productivity and how they might be changing. We mentioned yesterday that analysts seem to think the meteoric rise of litter sizes in the US is slowing down. That may be true but it would be the end of a pretty well-established trend at this point. The national average for the number of pigs saved per litter is still just over 10 while Europeans routinely wean 12 pigs or more. We have some of those farms in the US but they are not nearly as numerous. While this quarter could indeed see only a 1.3 per cent yr/yr increase, we still expect the rate to rise again. Just too many incentives are in place.
Litters per breeding animal is a different story. As can be see in the chart below, this measure has plateaued since 2007 and is showing no signs of increasing. This one has a mathematical limit, too. A gestation period of 114 days, 21 days of lactation (ie. nursing) and a 7 day wean-to-rebreed interval puts each reproductive cycle at 142 days. That means if everything goes perfect, a sow can produce 2.57 litters per year. Very few do that, of course, and figuring in those that do not breed quickly, do not breed at all, etc. means that the best farms will run only 2.2 to 2.3 litters/sow/year. This productivity factor may be at its practical limit — or very near there given recent performance.
Average slaughter weight is the next factor that has driven productivity higher. In 2012, each pig slaughtered in the US provided, on average, 23 pounds more carcass pork than one did 20 years ago. That is an increase of 12.6 per cent for the entire period or an average of 0.6 per cent per year. This growth is obviously a part of a long-standing trend that has only been slowed 3 times since 1986 — and all three periods coincide with high grain prices. Will this continue? We think so. While some retailers claim (perhaps quite correctly) that consumers prefer smaller cuts, no way has been developed that guarantees the necessary light-cut premiums will get passed back to packers and producers to compensate them for the efficiency they forego if they slaughter at lighter weights.
ThePigSite News Desk