Ron Plain

USDA's latest Quarterly Hogs and Pigs report came in very close to expectations. Their estimate of the total hog herd was 100.4% of a year earlier, with the breeding herd at 100.7% and the market herd at 100.3% of the 2004 values.

We are a little apprehensive about their breeding herd estimate. Our gilt slaughter data and USDA sow slaughter data indicate a somewhat larger breeding herd than the estimate in the report.

Farrowing intentions for December-February at 101.5% of a year ago indicate some productivity growth. Farrowing intentions for March-May at 100.3% continues the trend of the last few years with the second quarter farrow showing less growth than the first quarter farrow.

The number of pigs per litter increased 0.6% in the June-August quarter and 0.8% in the September-November quarter compared to these quarters in 2004.

The heavier weight market inventories along with a high probability that we will get more hogs from Canada indicate that first quarter slaughter in the U.S. will be up about 1% from a year ago.

The lighter weight market inventories suggest marketings will be a little below 2005 in the second quarter. With the potential for more feeder pigs coming from Canada, the odds are high for second quarter marketings and slaughter to be a little above a year ago.

Demand for pork and live hogs continues to be the key variable that is very difficult to estimate. Our demand index for pork shows a loss of 4.7% at the consumer level for January through November, but only a 0.5% loss at the live hog level. For September through November consumer demand appeared to be down 6% compared to a year earlier, but live hog demand was down only 3.1%. We lost about 28% of the live hog demand growth experienced during September-November of 2004 compared to 2003. We are expecting some loss of demand in 2006 compared to 2005. Hopefully, by the end of 2006 demand will stabilize, retaining around 50% of the late 2003 and 2004 demand growth.

The brightest picture for the hog industry continues to be exports. In the January-October period pork exports were up 23.4% from 2004, and 2004 growth was 27% above the 2003 level. 2005 is the 14th consecutive year with record high exports. Our growth in exports by country for the first 10 months of 2005 shows Japan up 16.4%, Canada up 31.7%, Mexico down 0.6%, Russia up 92.4%, South Korea up 157.4%, Hong Kong down 48%, China mainland up 48.2%, Taiwan down 39.4%, Caribbean up 54%, and others up 114.3%.

How much of the growth in exports was due to mad cow disease we do not know. Japan is the largest beef market that we lost because of BSE and Japan's pork imports from us were up only 16.4%. For all other countries, pork exports increased an average 29.3% in January-October. We expect pork exports to increase again in 2006 but believe the odds are high that the growth will be substantially less than in 2004-05.

A key unknown is how many feeder pigs we will get from Canada because of the December 15 tariff that Canada placed on US corn. The best we can tell, corn prices in Canada this week are $.60-$.70 per bushel higher than in the US (in US dollars). There are reports of efforts by Canadian hog producers to obtain a rebate from their government on the pork and live hogs they export. If these reports are true, there would be a question of whether the rebate would be considered an export subsidy and whether it would be legal under the trade agreements between the US and Canada.

Retail prices for pork for the January-November period were up 1.4% from a year ago, but November prices were 1.5% below November 2004. However, the high prices were accompanied by a reduction of 3.2% in consumption of pork per person in the US in January-November.

Slaughter hog weights for all of 2005, other than in the summer, were well above a year earlier. For the week ending December 24, the average weight of barrows and gilts in Iowa-Minnesota was 270.5 lbs. - up 4.8 lbs. from the same week last year.

Slaughter for December looks large compared to the 180 lb. and heavier market inventory on December 1, which was up only 0.12% from a year earlier. However, having Christmas and New Years on Sunday this year rather than Saturday as in 2004 may have influenced slaughter in December some.

Our current estimate for 2005 shows hog slaughter up 100,000 head from 2004. Market inventories and farrowing intentions show the potential for about 1% growth in hog slaughter numbers from 2005 to 2006. If these estimates hold up, it will be the 5th consecutive year of increasing slaughter hog numbers in the US.

Do we still have a hog production cycle? The hog price cycle continues to hold close to the 4-year cycle but the leg up in prices starting in 2003 and through 2004 was due to growth in demand and not a reduction in production.

Our estimates of slaughter by quarter and prices through 2006 are in Table 4.

Table 1. Hog Inventories December 1, U.S.
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 2005 as % of 2004
 Market 100.3
 Kept for breeding 100.7
 All hogs and pigs 100.4
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Table 2. Market Hogs on Farms December 1, U.S.
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 Weight Category 2005 as % of 2004
 Under 60 pounds 99.9
 60 119 pounds 100.8
 120 179 pounds 100.7
 180 pounds and over 100.1
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Table 3. Sows Farrowing and Intentions, U.S.
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 2005 as % of 2004
 June-August 99.8
 September-November 100.0
 2006 as % of 2005
 December February 101.5
 March-May 100.3
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Table 4. Estimated Commercial Hog Slaughter by Quarter and Live Hog Prices
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 Commercial Terminal Mkt. 51 52% Lean Non packer sold
 Slaughter Barrow & Gilt Hogs Hogs (avg. net
Period (mil. hd.) (price/cwt) (price/cwt) carcass price/cwt)
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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 $51.67
 Year 97.962 43.50 45.81 n/a

2002 1 24.148 $37.23 $39.43 $54.25
 2 24.280 32.77 34.99 50.43
 3 25.120 31.09 33.86 49.66
 4 26.715 28.52 31.34 46.10
 Year 100.263 32.40 34.91 50.09

2003 1 24.654 $33.32 $35.38 $50.40
 2 23.922 39.86 42.64 58.92
 3 24.747 38.66 42.90 59.27
 4 27.608 34.15 36.89 52.36
 Year 100.931 36.50 39.45 55.25

2004 1 25.717 $40.82 $44.18 $60.56
 2 24.737 51.56 54.91 72.74
 3 25.817 53.72 56.58 74.73
 4 27.192 50.58 54.35 71.58
 Year 103.463 49.17 52.51 69.90

2005 1 25.529 $48.46 $51.92 $69.33 
 2 25.028 49.08 52.09 70.25 
 3 25.515 46.72 50.51 68.37
 4 (part. est.) 27.490 41.60 44.92 61.65
 Year (proj.) 103.561 46.46 49.85 67.40

2006 1 (projected) 25.900 40 - 43 43 - 46 58 - 62
 2 (projected) 25.200 43 - 46 46 - 49 62 - 66
 3 (projected) 25.800 38 - 41 41 - 44 56 - 60
 4 (projected) 27.800 34 - 37 37 - 40 50 - 54
 Year (proj.) 104.700 39 - 42 42 - 45 56 - 60 
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