Summary

USDA raised its fourth-quarter 2009 price forecast of 51 to 52 per cent lean live equivalent hogs to $39 to 40 per cwt, as the effects of a slightly lower spring pig crop and lower live swine imports begin to take hold. Wholesale pork prices are also showing strength. US pork exports for October were 3.5 per cent lower than a year ago. October imports were 2.7 per cent higher, with live imports down 28.8 per cent compared with October 2008.

Hog Prices, Pork Demand Show Signs of Increasing

Fourth-quarter hog prices are typically the lowest of the year. This is true because it is during the October-December period when most of the spring pig crop – typically the largest of the year – is slaughtered: quantity of hogs available for supply increases, price paid for hogs decreases. This year, however, a smaller spring breeding herd resulted in 2.65 per cent fewer sows being farrowed than in spring 2008. Fewer farrowings were largely offset by more pigs per litter. The marginally smaller pig crop plus significantly lower imports of Canadian swine will hold available supplies of slaughter hogs below fourth-quarter 2008 and fourth-quarter pork production at levels slightly below a year ago.

The smaller supply of slaughter hogs available this year is showing up in the relationship between third- and fourth-quarter hog prices. In the last 30 years, fourth-quarter hog prices have averaged more than 12 per cent below third-quarter prices. The USDA hog price forecast places the fourth-quarter price of 51-52 per cent lean live equivalent hogs at $39-$40, 1.5 per cent above third-quarter hog prices. While still considerably below most hog producers’ production costs, year-over-year higher prices suggest a welcome tightening of hog supplies.

Stronger pork demand may also be contributing to stronger fourth-quarter hog prices. The USDA estimated carcass cut-out for November was 2.7 per cent higher than a year ago. The last month in 2009 when wholesale pork prices were year-over-year higher was March, when the cut-out price was 0.6 per cent greater than in March 2008. In the first 10 months of 2009, wholesale pork prices have averaged nearly 18 per cent below prices in 2008. Year-over-year higher wholesale prices for picnics, ribs, hams and trimmings are currently driving the cut-out higher. Increasing prices for picnics and trimmings, in particular, suggest export interest.

Fourth-quarter 2009 exports are expected to be year-over-year higher for the first time this year, at 1.175 billion pounds. Exports in 2010 are expected to be 4.6 billion pounds, 10.2 per cent higher than this year, and just shy of the all-time record in 2008 of 4.7 billion pounds. For the balance of this year, and on into 2010, the relatively low-valued US dollar and the nascent economic recovery in primary US export markets of North America and Asia are expected to support higher 2010 exports.

Further Reading

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December 2009