Hogs/Pork

The USDA forecast for first-quarter 2007 commercial pork production was lowered 50 million pounds, to 5.325 billion pounds, due to slightly lower-thanexpected slaughter and lower average dressed weights. First-quarter prices of liveequivalent 51-52 percent lean hogs are expected to range between $46 and $47 per hundredweight (cwt), more than 9 percent above first quarter a year ago. Hog prices will likely be lower in the second half of this year as pork production accelerates seasonally and broiler production expands. U.S. packers and hog finishers are expected to import 9.35 million head of hogs from Canada this year, an increase of almost 7 percent over last year.

First-Quarter Pork Production Forecast Lowered Slightly

The USDA forecast for first-quarter 2007 commercial pork production was lowered50 million pounds, to 5.325 billion pounds, due to slightly lower-than-expected slaughter and lower average dressed weights. For 2007, U.S. pork production isexpected to be 21.6 billion pounds, 2.6 percent above last year. Dressed weights for2007 are expected to average about one pound below 2006 weights, due to higher corn prices. First-quarter prices of live-equivalent 51-52 percent lean hogs are expected to range between $46 and $47 per cwt, more than 9 percent above first quarter a year ago.

Hog prices will likely be lower in the second half of this year—between $44 and $48 per cwt in the third quarter, and between $43 and $47 in the fourth quarter—as pork production accelerates seasonally and broiler production increases. Secondhalf pork production is expected to increase more than 3 percent over the same period last year. Relatively high broiler prices right now, due to lower production, support domestic pork demand and contribute to strong hog prices. With higher U.S. broiler production expected in the second half of this year, declining broiler prices will present pork products with more competition for the consumer’s food dollar. For 2007, hog prices are expected to range between $45 and $47 per cwt, about 2 percent below $47.26 per cwt in 2006.

Swine Import Forecast for 2007 Raised to 9.35 Million Head

U.S. packers and hog finishers are expected to import 9.35 million head of hogs from Canada this year, an increase of almost 7 percent over last year. Strong hog prices from robust pork demand in the United States, combined with continued turbulence in the Canadian packing industry, create strong incentives for Canadian swine to come south, despite an exchange rate that is punitive to Canadian sellers. USDA data (http://www.ams.usda.gov/lsmnpubs/canada.htm) indicate that U.S. imports of barrows and gilts, through March 10th, increased almost 12 percent over the same period a year ago. Imports of finishing animals—feeder pigs and segregated early weans—increased 9 percent, compared with the same period last year.

Canadian Hog and Pork Production Expected To Be Lower in 2007

Despite recently published Canadian statistics and analysis that point to a smaller Canadian breeding herd and a slightly reduced pig crop in 2007, prospects of larger U.S. swine imports this year are supported by continued year-over-year lower Canadian slaughter numbers and ongoing restructuring in the Canadian processing industry. Hog numbers published by Statistics Canada (http://www.statcan.ca/bsolc/english/bsolc?catno=23-010-X&CHROPG=1) showed a January 1, 2007 inventory of sows and bred gilts that was 1 percent lower than a year earlier. Québec accounts for most of the reduction, while Manitoba’s herd increased slightly. Canada’s pigs-per-litter in the October-December quarter were 9.45 versus 9.43 a year earlier, suggesting that Canada’s producers may be getting on top of recent disease problems. The comparable figure for U.S. pigs-per-litter (September-November 2006) is 9.13.

A slightly lower Canadian pig crop is expected in 2007—32.8 million head, down from 33.2 million in 2006. While 26 percent of the Canadian pig crop was exported to the United States in 2006, 29 percent is expected to come south this year. The factors the report cites as contributing to higher live exports to the United States include restructuring in Canada’s processing industry, the moratorium currently in place on expansion in Manitoba, and feed price uncertainty.

The 37-percent appreciation of the Canadian dollar relative to the U.S. dollar between January 2002 and February 2007 is the major source of the Canadian hog and pork industry’s present struggle. The relatively high-valued Canadian dollar makes Canadian pork products more expensive in international markets, particularly those where they compete with U.S. products, as in Asia. This is an enormous issue for an industry that sells more than half of its pork abroad.

Previously, a lower-valued Canadian dollar provided the Canadian processing industry with a “cushion” that reduced the urgency of staying on top of other processing costs—labor, for example. The now relatively expensive Canadian dollar has exposed the Canadian industry’s higher cost structure, which prevents it from providing hog producers with sufficient price incentives to sell hogs in Canada rather than in the United States.

Lower Canadian slaughter statistics (http://www.agr.gc.ca/redmeat/mimain.htm) for the final quarter of last year and continuing into January 2007 illustrate the Canadian processing industry’s ongoing competitiveness struggle. Fourth-quarter Federal and provincial slaughter was down about 2.5 percent from the same period in 2005. January 2007 slaughter was off by almost 7 percent from a year earlier. Restructuring of Canada’s two largest hog processors will likely continue to constrain slaughter numbers in Canada this year. Canada’s pork production in 2007 will likely be more than 3 percent lower than last year.

Further Information

For more information view the full Livestock, Dairy and Poultry Outlook - March 2007 (pdf)

March 2007