(thousands)
March 1 Inventory	2008	2009	2009 as % of 2008
Kept for Breeding	6200	6011	97
Market	61108	59378	97

Market Hogs and Pigs by weight group (thousands)
Under 60 pounds	22137	21458	97
60 - 119 pounds	14490	14126	97
120 - 179 pounds	13193	12862	97
180 pounds and over	11199	10932	98

Breeding Herd

The USDA has the US breeding herd down 189,000 from last March. This is a decline of almost 4,000 per week. In the three months from last 1 December, the USA breeding herd declined 70,000 – or about 5,000 a week. The attrition is continuing in the breeding herd. The pundits who were predicting that breeding herd liquidation had stopped were wrong. We have never seen liquidation not happening when producers are losing $20 to $30 per head. It appears the trend continues. The breeding herd inventory always ebbs and flows with the total aggregate of people leaving or cutting back and producers building or adding. What we believe is happening is little new sow barn construction or herd expansion. We see an ongoing liquidation of producers running out of capital and courage. In the last quarter where we had a 70,000 decrease in breeding herd inventory we expect the production sector lost about $25.00 per head with total losses of approximately $1.5 billion US in the quarter. How the heck will there not be liquidation with such misery.

We believe the breeding herd will continue to decrease for the next six months no matter how high summer hog prices go. This is because few if any new sow units are being built and high hog and sow prices will be liquidation triggers for some producers to get out voluntarily and or involuntarily.

USDA Market Hogs Inventory

The USDA March market inventory was about 1.6 million per head lower than March a year ago. It is not hard to figure why there are empty barns when there is an equivalent of 1,600 -1,000 head barns not being used compared to a year ago. We expect the decrease of inventory will continue as Canada’s shipments of small pigs to the USA are down over 60,000 average per week year over year in the last seven weeks. The largest year over year decrease as of yet. 60,000 X 25 weeks would eventually lead to 1.5 million less hogs in inventory year over year which is also a 3 per cent decrease in USA based slaughter hog availability. Relate this with the USA breeding herd down to 189,000 and still declining. We expect USA born pigs to continually be below year over year for the foreseeable future.

We can’t understand the USDA count of market hogs down 3 per cent. It seems not big enough. We continue to expect due to the continual decline of Canadian pigs and market hogs (100,000 less per week) year over year, the US slaughter will be down close to 5 per cent. In the coming weeks as marketings decline we still expect to get weekly numbers to be around 1.9 million a week. A year ago hogs were at 54 cents lean average for March. Lean hogs averaged 79 cents in May. When we look at the USDA report and Canadian imports we are convinced that we will see at least 100,000 less hogs per week in the next while. Our destiny will be driven by cash not lean hog futures. Supply is going to plummet. All indications appear to show exports are holding as well as domestic demand. We are lonely in our confidence but unlike the professional pundits who are hanging around 75 cent lean as a high we are convinced the decline of hog supply will with current demand dynamics push lean hogs to 90 cents.

Other Observations

• We expect Canada’s breeding industry is still declining. When Canada’s April 1st inventories are released the aggregate of Canada, USA, and Mexico’s breeding herd will be down 500,000 from its peak. We had expected this last January 1st but we were early. We expect the Canada, USA, and Mexico breeding herd inventory is currently declining at about 6,000 a week. At that rate we will see 300,000 fewer in a year if we don’t get a turnaround from real solid profits.
  
  
• Last week we reported the European Union’s 27 country breeding herd down 1.6 million sows in the last two years. Cutting supply always helps prices. In the last few weeks prices have increased in Spain, Europe’s largest producer to 1.502 Euros a kilo or 90 cents US per pound. Higher prices in the European Union will support North America export opportunities.
  
  
• Not since 1975 has the USA poultry, beef, and pork sectors been down in supply at the same time. In 1975 hogs set a historical price highs. A week ago year over year pork production was down 29 million pounds, beef down 10 million pounds, chicken down 85 million pounds, turkey down 5 million pounds for a grand total decline weekly year over year of about 125 million pounds less total meat and poultry. Give or take 3,000 tractor trailer less loads of poultry and meat. We are approaching unchartered waters. What we see is week upon week of huge supply declines. 3,000 loads per week, week upon week. The relentless decline is a massive market mover. It’s almost beyond comprehension what is beginning to happen. 3,000 less loads per week, week upon week! Maybe we are crazy but we cannot comprehend why this supply shock will not push hog prices to 90 cent lean levels.

Summary

The USA breeding herd declined 70,000 in the 13 weeks between 1 December and 1 March. Liquidation was aggressive. The financial losses of the last 15 months are discouraging, this has stopped new barn construction and is pushing people out of the business. We expect to see weekly US hog marketings in May – June to be down year over year by over 100,000 head a week. Lean hog prices will catch fire in the coming weeks fueled by not only fewer hogs but by the once every two generation decrease of all meat and poultry supplies. We expect lean hog prices will reach 90 cents in June.

GENESUS FINISHING PERFORMANCE

Genesus customer Whitetail Farm finishing progeny from 100 per cent Genesus KS11’s (true F1 – Genesus Purebred Yorkshire X Genesus Purebred Landrace) bred to Genesus T300 (Genesus Purebred Duroc boar). All February Shipments to Tyson Foods – Perry & Storm Lake, Iowa plants.

Further Reading

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You can view the USDA Quarterly Hogs and Pigs Report - March 2009 by clicking here.