Live Hog Prices Dependent on Sow Herd Reduction

by 5m Editor
2 July 2008, at 1:03pm

CANADA - Rabobank International predicts the impact of efforts to reduce North American swine production will take some time to impact live hog prices, writes Bruce Cochrane.

The Canadian Cull Breeding Swine program has reached just over the 100 thousand sow mark while sow slaughter numbers in the U.S. have been well above year ago figures for the first half of this year and are expected to accelerate.

Rabobank International executive director food and agribusiness research Fiona Boal says it'll take some time for those numbers to work themselves through the system.

Fiona Boal-Rabobank International

The catch phrase hogs, hogs and more hogs probably is still the best way to describe the industry at the moment unfortunately.

Many of your readers would have been waiting around on Friday afternoon to see the latest USDA hogs and pigs report which implied, in the U.S. anyway, that we'd have record slaughter levels right through to the end of 2008.

Based on my calculations that means U.S. production will be anywhere between about six and ten percent higher for the whole of 2008 compared to last year.

We've got a lot of hogs to still work through the system and, in the U.S. particularly, big supplies of meat and we really don't think that we're going to see any big reduction in production until about the middle of next year or maybe slightly before that but it's going to take awhile.

I think, just as the industry was quite slow to ramp up production when it was profitable, I think the same is the case in terms of reducing production.

It's actually a slow process and it takes you awhile to cut production in light of these high feed costs.

Boal says the meat industry has traditionally had to cut supply to induce higher prices and there is a time lag associated with that strategy but she's confident reducing supply will ultimately push up prices.

But she says, based on the futures prices, its difficult to see U.S. producers getting back to anything even close to profitability before the third quarter of next year.

5m Editor