US Swine Economics Report

by 5m Editor
2 April 2008, at 11:59am

The end of March brought more bad news for US hog producers, writes Ron Plain in his Swine Economics Report.

Today, USDA’s March Prospective Plantings report predicted 2008 corn acreage would total 86.0 million, down 8.1% from last year. Thus, it seems feed costs are likely to set a new record this year.

Last Friday’s quarterly survey of the US swine inventory came in above the high end of trade expectations. At 107.2% of March 2007’s level, the market herd on March 1 was 2.6 percentage points above the average of pre-release trade estimates.

As expected, USDA revised upward some of their past inventory estimates. Based on the December report, hog slaughter during December-February was expected to be up a bit less than 5%. It actually came in 11.1% above the same months last winter (or up 10.5% after adjusting for the increase in imports of Canadian slaughter hogs). USDA revised up their December market hog inventory by 3.1%. They also increased the size of the June-August pig crop by 1,229,000 head.

Improved breeding herd performance helped explain the larger inventory. Pigs per litter in the December-February quarter averaged 9.21, up 1.3% compared to a year earlier and the 18th consecutive quarter above year-ago levels.

Farrowings per animal in the breeding herd was up an amazing 5.4% in June-August and up 4.1% in September-November. Both quarters averaged more than 0.5 litters farrowed per animal in the breeding herd, a first.

USDA said the inventory of market hogs weighing 120-179 pounds was up 6.5% on March 1 and the inventory of market hogs weighing 60-119 pounds was up 7.0%. If these numbers are right, second quarter hog slaughter should be up roughly 7%. If so, expect April-June live hog prices to average in the upper $40s/cwt.

USDA said the inventory of market hogs weighing less than 60 pounds was up 7.4% on March 1, implying third quarter hog slaughter will be up roughly 8%. I expect third quarter live hog prices will average in the mid $40s.

My current forecast is that live hog prices in 2008 will average close to $42/cwt (the lowest since 2003) and cost of production will average close to $54/cwt, a record. This results in a loss of $12/cwt or roughly $32 per head, also a record.

Further Reading

More information - You can view the full USDA Quarterly Pigs and Hogs Report - March 2008 clicking here.

5m Editor