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Ron Plain

The June 1 Hogs and Pigs report came in mixed as compared to expectations. The total number of hogs on farms was down 2.6%, the breeding herd was down 4.3%, and the market herd was down 2.4% from a year earlier.

The breeding herd number is consistent with gilt and sow slaughter. The market herd was a little less than we expected. The marketings during June were consistent with the 180 pound and heavier market inventories.

The surprises in the report for us were the high farrowing intentions for June-August of 97.9% and for September-November of 99.2% compared to farrowings in 2002 for these periods. These levels of farrowings from a breeding herd that was down over 4% on June 1 point to a very healthy productivity growth. Litter size productivity growth for the first half of 2003 was up 0.7% from 12 months earlier. If these farrowing intentions materialize and we get a 1% increase in litter size along with some increase in slaughter weights, pork production in the first half of 2004 could be as large as in 2003.

Pork demand at the consumer level for January-May of 2003 was down over 4% based on preliminary data. The good news is that demand for live hogs for these 5 months was down less than 1%. We have hopes that demand at the live hog or producer level will be up some for all of 2003 compared to 2002.

Pork exports for January-April of this year were up 7.6% from 12 months earlier. Pork exports to Canada for this period were down over 17% and down nearly 20% to Mexico. However, exports of pork to Japan were up over 10%, to South Korea up over 115%, up over 50% to Hong Kong, and up 79% to the other countries. The probabilities are high for pork exports to set another record high in 2003 -- the thirteenth consecutive year for growth in exports.

The bad news for hog and pork prices is that pork imports for January-April were up almost 20% from the same months of 2002. Most of the increase in imports was from Canada (up about 19%) and Denmark (up nearly 28%).

Live hog imports from Canada for these 4 months were up 5.6%. Feeder pig imports were up 21.7% and slaughter hog imports were down 22.6% when compared to the same months of 2002. These larger feeder pig imports are fueled at least in part by corn growers in the Cornbelt who wish to feed hogs but not farrow them.

Most categories of pork in cold storage at the end of May were down from a year earlier. Belly stocks on May 31 were down 26% and total stocks of pork were down 9% from the same date in 2002.

If productivity growth develops for the next year as this preliminary data indicates, pork production may be as large in 2004 as 2003. With a continuation of the long-time demand growth of 1.5% a year, hog prices in 2004 could still be up a little from 2003.

To move hog prices up to the levels needed to recover the lost equity of the past 5 years we need the breeding herd to be reduced another 4-5%. In our opinion, we think the odds are low to get the breeding herd reduced another 4% during the next year given the current structure of the sow herd.

We expect hog slaughter in the July-September 2003 to be down over 4% from the same months of 2002. The heavier weight market inventories do not show this much decrease from 2002, but producers pulled marketings forward from the fourth quarter to the third quarter last year because of concerns about fourth quarter prices. This year we expect marketings during the third quarter relative to the June inventories to revert back to the relationship of 1998-2001.

The lighter weight inventories in the June market category point to fourth quarter marketings being down only about 2% after adjusting for a normal marketing pattern this fall and early winter.

As indicated earlier, the farrowing intentions for the summer suggest a slaughter level for January-March that is down only about 1%. A reduction in farrowing intentions for the fall of 2003 of only about 1% indicates the potential for a second quarter 2004 slaughter close to the same quarter of 2003.

Our slaughter and price estimates by quarter for the next year are in Table 4.

Table 1. Hog Inventories June 1, U.S.
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 2003 as % of 2002

 Market 98
 Kept for breeding 96
 All hogs and pigs 97
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Table 2. Market Hogs on Farms June 1, U.S.
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 Weight Category 2003 as % of 2002

 Under 60 pounds 97
 60 - 119 pounds 97
 120 - 179 pounds 98
 180 pounds and over 99
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Table 3. Sows Farrowing and Intentions, U.S.
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 2003 as % of 2002

 December-February 98
 March-May 96
 June-August 98
 September-November 99
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Table 4. Estimated Commercial Hog Slaughter by Quarter and 
 Live Hog Prices 1997-2003 
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 Commercial Terminal Market 51-52% Lean
 Slaughter Barrows & Gilts Hogs
 Period (mil. hd.) (price/cwt.) (price/cwt.)
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 1997 1 22.308 $51.01
 2 21.831 56.43
 3 22.679 54.09
 4 25.142 43.69
 Year 91.960 51.30

 1998 1 24.776 $34.74
 2 23.628 39.42
 3 25.039 33.62
 4 27.586 19.49
 Year 101.029 31.82

 1999 1 25.579 $26.55 $28.83
 2 24.288 33.06 35.18
 3 24.953 32.78 35.70
 4 26.724 33.88 36.29
 Year 101.544 31.57 34.01

 2000 1 25.039 $39.11 $41.14
 2 23.125 47.99 50.43
 3 24.097 44.19 46.44
 4 25.715 38.33 40.78
 Year 97.976 42.41 44.70

 2001 1 24.578 $40.77 $42.83
 2 23.280 50.21 52.05
 3 23.635 48.04 51.05
 4 26.469 34.97 37.30
 Year 97.962 43.50 45.81

 2002 1 24.148 $37.23 $39.43 
 2 24.280 32.77 34.99
 3 25.120 31.09 33.86
 4 26.715 28.52 31.34
 Year 100.263 32.40 34.91

 2003 1 24.620 $33.32 $35.36
 2 (part. est.) 23.875 40.00 42+/-
 3 (projected) 24.000 37 - 40 39 - 42
 4 (projected) 26.050 33 - 36 35 - 38
 Year (proj.) 98.545 36 - 37 38 - 39

 2004 1 (projected) 24.125 $36 - 39 $38 - 41
 2 (projected) 23.850 39 - 42 41 - 44
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