US Pork Outlook Report - April 2010

Lower hog supplies are expected for the remainder of 2010 and 2011, according to the USDA Economic Research Service (ERS) April 2010 Livestock, Dairy and Poultry Outlook.

21 April 2010

5 minute read

Summary

The Quarterly Hogs and Pigs report released by USDA on 26 March showed year-over-year lower 1 March inventories of market hogs and breeding animals, year-over-year lower producer farrowing intentions for the spring and summer pig crops, and a slowing rate of increase in the winter pigs per litter. The lower US hog production implied by the report, combined with expected lower US live swine imports, points to lower hog supplies for the balance of 2010 and into 2011. Lower hog supplies, at a time when a recovery of pork demand is expected to get under way, foreshadows continued higher hog prices.

March Quarterly Hogs and Pigs Report Shows Lower Hog Numbers

The Quarterly Hogs and Pigs report released by USDA on 26 March indicates that the US pork industry continues to reduce its capacity to produce hogs in response to an extended string of negative monthly producer returns that began in late 2007 and only recently began to abate. The industry began to pare back breeding herd numbers in June 2008. The 1 March inventory of market hogs shows that prior breeding herd reductions are translating into smaller inventories. The inventory of market hogs was 2.7 per cent below a year ago, and the stock of breeding animals was 3.9 per cent below March 2009. Lower numbers of breeding animals will continue to have supply implications going forward. A reduced capacity to produce hogs, together with lower producer farrowing intentions for both the spring (-4.0 per cent) and summer (-2.4 per cent) pig crops, strongly suggests that the industry will have fewer domestic-born animals to sell for the balance of 2010, continuing into 2011.

The March report also shows that the litter rate for the winter pig crop grew at a slower rate than in the recent past. The pigs-per-litter rate for the December- February pig crop is 9.61, a 1.37-per-cent increase from last year’s litter rate; not bad certainly, but less than the five-year average of year-over-year changes in the December-February litter rate (1.39 per cent), and far less than the percentage increases registered in 2009 (2.6 per cent) and 2008 (1.65 per cent). Lower pigs-per-litter growth rates could be due to an aging breeding herd, a phenomenon that often develops when the industry downsizes. Breeding herds are not refreshed with new gilts as quickly – or sometimes not at all – when operations are losing money or are planning to shut down altogether. Fertility rates of younger animals are typically higher than those of older sows. Litter rates tend to increase faster when younger animals comprise a greater percentage of the breeding inventory. Lower rates of increase in litter rates could turn out to be another factor that contributes to lower hog numbers for the balance of 2010 and into 2011.

Lower inventories of market hogs and breeding animals, lower producer intentions for the spring and summer pig crops, and the possibility of smaller increases in litter rates going forward are reflected in USDA’s April forecast of 2010 commercial pork production of 22.3 billion pounds, about three per cent below 2009.

Lower expected hog supplies – domestic and Canadian-born – plus the likelihood of stronger consumer pork demand are expected to yield year-over-year higher hog prices for the balance of 2010. Second-quarter 2010 prices of 51 to 52 per cent lean live-equivalent hogs are expected to be $52 to $54 per hundredweight (cwt); third quarter, $53-$57 per cwt, and fourth quarter, $45-$49 per cwt.

February Pork Exports Above Year-Ago Levels; Pork and Live Imports Lower

February US pork exports, at 362 million pounds, were six per cent higher than a year ago. Combining February exports with January’s year-over-year lower shipments puts US pork exports at 676 million pounds, about two per cent higher than the same period last year.

In February, increased shipments to Mexico, Canada, Hong Kong and Taiwan pushed exports ahead of February 2009, while exports to Japan, China and Russia were year-over-year lower.

Combined US pork imports for January and February are lower, by almost three per cent from last year. Smaller imports from Denmark account for most of the reduction. US imports of live swine (finishing animals and slaughter hogs) were lower in both January and February. So far in 2010, imports are down by more than 17 per cent, with January off by almost 23 per cent and February down by almost 11 per cent. Higher US hog prices may create incentives to import more Canadian animals than otherwise would be the case. USDA forecasts US swine imports this year at six million head, six per cent below last year.