CME: Producers Prepare for Continued Cutbacks

US - The latest numbers from Statistics Canada confirmed what many market watchers already knew, inventories of cattle and hogs in Canada continue to drift lower and they are now significantly smaller than only a few years ago, write Steve Meyer and Len Steiner.
calendar icon 21 August 2009
clock icon 4 minute read

Based on the 1 June and 1 July inventories for US and Canada, respectively, the combined US + Canada cattle inventory currently stands at 116.640 million head, 1.8 million head or 1.6 per cent lower than a year ago. This is the smallest combined cattle inventory number since at least 1996 (no Canadian data available prior to that year). The combined hog inventory now stands at 78.184 million head, 2.2 million head or 2.7 per cent lower than the previous year.

Despite the big decline in overall hog numbers, however, the combined hog inventories in US and Canada are by not means small. They are just 0.6 per cent smaller than in 2007 and the third largest on record. The North American hog industry expanded rapidly, thanks to strong global demand for pork and it will take time for the market for find the right balance given current industry losses.

While current inventories paint a picture of the overall supply picture in North America, the breeding stock numbers provide a glimpse of what is to come. In both cases, the outlook is for smaller supplies due to a sharp contraction in the beef cow and sow inventories.

The combined US and Canada beef cow inventory was 36.788 million head, 1.9 per cent smaller than a year ago and the second consecutive year of big inventory reductions. The inventory of beef cows in US and Canada has been declining for over a decade and this is the lowest since at least 1996. The semi-annual surveys show that there is little appetite for expansion, in the US or Canada. The number of US heifers held back for beef cow herd rebuilding on June 1 was 4.5 million head, 2.2 per cent smaller than a year ago. Canadian heifers held back for beef cow replacement were 638,400 head, 2.5 per cent less than a year ago. The situation in the hog complex has changed even more dramatically, considering that only two years ago this was still a growing industry. The combined US and Canada sow inventory declined 2 per cent last year and another 3 per cent this year.

As we noted a few days ago (8/17), the Canadian sow herd has been declining for some time. But because the US sow herd accounts for more than 80 per cent of the total North American breeding stock, it will take significant changes in US operations in order to see a meaningful impact in the combined breeding stock. The Canadian report showed that, just as in the US, producers are preparing for continued cutbacks going forward. Canadian producers indicated that farrowings in Q3 are expected to be down 4.1 per cent and decline 5.5 per cent in Q4. Some of this will likely be offset by increased productivity, which in the case of the US will likely offset most of the decline in farrowings.

© 2000 - 2022 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.