CME: Smithfield to Purchase Only US-Bred Hogs

US - CME's Daily Livestock Report for 25 March 2009.
calendar icon 26 March 2009
clock icon 3 minute read

Hog futures have been trading sideways for much of this week on uncertainty about future supplies as well as ongoing export demand concerns. The upcoming USDA hogs and pigs inventory report should provide an indication of current and future hog supplies and will be especially useful in gauging farrowings in the past quarter as well as the impact of reduced Canadian shipments on the size of the total inventory.

There has been plenty of talk in recent months of empty sow barns across Iowa and the upcoming inventory numbers should provide some indication of where we stand with regard to the size of the breeding herd.

Sow slaughter has been running significantly below year ago levels (almost –10 per cent since mid January). Prices for 500-500 lb. sows in March are some 80 per cent over year ago. This suggests that producers at this point see little reason to continue to liquidate productive animals, especially given current feed grain prices.

Also important going forward will be the decision by Smithfield Foods to only purchase hogs that are born and raised in the US, effective April 2009. News reports indicate that other large packers may follow suit, restricting or eliminating the purchase of Canadian born animals. In the short term, this will tend to boost demand for slaughter animals at a time when supplies will be the tightest (see below). Attached is a summary of analysts’ estimates from a survey conducted by Dow Jones (per cent of year ago).

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