Expanded Herd Reduction Forecast for Fall Quarter

by 5m Editor
13 August 2009, at 9:51am

CANADA - Des Moines, Iowa based Paragon Economics is projecting deeper cuts to the North American sow herd as producers respond to increased feed costs and the recent large sell-off of lean hog futures, writes Bruce Cochrane.

North American hog producers have faced prolonged losses resulting primarily from a run-up in corn and soybean prices that began in 2006 and escalated in the fall of 2007 adding anywhere from 25 to 30 per cent to production costs while a strong Canadian dollar has intensified the losses in Canada.

Paragon Economics President Dr. Steve Meyer observes production has not gone down as much as the losses would dictate.

Dr. Steve Meyer-Paragon Economics

I think we're going to probably pull this breeding herd down 10 to 12 per cent from the level it was in October of 2007.

Canada has largely accomplished their share of that thing.

I think they're going to do a little bit more.

They're at 1.38 million.

I think they're going to go down into the 1.2s, I don't know if they'll get all the way to 1.2 million.

That means that the US herd needs to come down by somewhere around 400 thousand head from the 5.9 million that we had in June so we still have to cut back six to seven per cent here.

I think the Canadian herd is going to continue to decline for at least another year and the total that we need, I think, in North America is somewhere in the 6.8 range which is down from well up into the seven million range just a couple of years ago.

Dr. Meyer notes up until the last three weeks, especially in the United States, most of the reduction of the breeding herd, about two to three per cent over the past six quarters, has been made up for by increased productivity.

However he observes there are anecdotal reports that indicate more sows have moving to market over the last two to three weeks in response to higher feed costs and the sell-off of lean hog futures and he expects a much more sizable reduction as we move into September and into the fall quarter.