CME: US Swine Herd Continues to Decline

US - USDA’s quarterly Hogs and Pigs Report, released Friday afternoon, indicated that the US swine herd continues to shrink and that the pace of that reduction may have, as expected, increased in the June- August quarter, write Steve Meyer and Len Steiner in their Daily Livestock Report for 25 September.
calendar icon 28 September 2009
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The key numbers from the report along with the averages of analysts’ pre-report estimates appear in the table below.

Some highlights of the report are:

  • An increase in the rate of breeding herd liquidation. June’s quarterly report showed a breeding herd of 5.967 million head, 2.7 per cent lower than that of June 2008. The September 1 hers is estimated to be 5.874 million head, 3.1 per cent lower than on year ago. The June-August reduction is bad news and good news. The bad news is that this 1 June to 1 September decline of 93,000 head is small by historical standards. The last three liquidations of the US sow herd in 1995, 1999 and 2002 saw the herd drop by 210,000, 214,000 and 157,000, respectively, during the Jun-August quarter. The good news is that this 1 September estimate caught just the first three weeks of the higher sow slaughter that we have seen since CME Lean Hogs futures collapsed in July. That decline was arguably the clearest liquidation symbol yet to a sector badly in need of lower sow numbers given productivity increases and export disruptions. Therefore, a larger quarter-to-quarter and year-on-year reduction is very likely when the December count is taken — but don’t expect that reduction to be as large as past reductions either. The structure of this sector makes is very difficult to reduce numbers quickly.

  • The 180 lbs-and-over inventory, at 99.7 per cent of last year’s level. Slaughter thus far in September, when adjusted for fewer Canadian market hogs and one less weekday thus far this year, is almost identical to one year ago. That lends some credence to the report. The pre-report estimate of 99.0 per cent now appears low.

  • The 1 September breeding herd, June-August farrowings and June-August pig crop figures appear to fit well given the 2 per cent increase in litter size. The under-60-lb. inventory at 96.3 per cent looks about 1 per cent small relative to the pig crop even after considering that imports of Canadian pigs from mid-July through the end of August are nearly 300,000 head lower than one year ago.

  • Litter size keeps on growing — and growing at an unprecedented pace. As can be seen in the chart above, the rate of increase since June 2007 (which, by the way is almost precisely the time that vaccines for porcine circovirus (PCV) became available) is the best ever, averaging 2.1 per cent, year-over-year. The only period that gets close to that was December 1994 through September 1997, a period during which larger, generally more efficient farms were taking market share from smaller farms that were exiting the business. While some "weeding out the inefficient" is still being done, these recent gains are driven by excellent animal health and better genetics and management.

Further Reading

- You can view the 1 September Quarterly Hogs and Pigs Report by clicking here.
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