US Swine Economics Report

The end of March brought more bad news for US hog producers, writes Ron Plain in his Swine Economics Report.
calendar icon 2 April 2008
clock icon 3 minute read

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.
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