September Quarterly Hogs & Pigs Report Summary

by 5m Editor
29 September 2009, at 11:21am

US - The September report came in a little more positive than the trade estimates, write Ron Plain and Glenn Grimes.

The average of the trade estimates was for a 1.8 per cent decline. Kept for breeding was down 3.1 per cent according to USDA; the trade estimate was for a 2.6 per cent decline. The market inventory was down 2.2 per cent and the trade estimate was for a 1.7 per cent decline. (See Table 1) On the Monday after the report was released, the futures market opened with gains of $0.22 to $0.70 per cwt.

USDA revised upward their estimate of the number of litters farrowed during December-February 2009 by 1.5 per cent and the pig crop during those months by 1.6 per cent. This brought the June market hog inventory more in line with summer hog slaughter. USDA revised upward the 60-179 pound market inventories in June by 0.7 per cent in the September report. The 180 pound inventory on 1 September was consistent with September marketings.

In recent reports the USDA has estimated numbers a little below the trade estimates but actual marketings on average have been above the trade estimates. We must remember the USDA estimates are based on a sample and the trade estimates are based on other statistics and opinions. Therefore, both estimates are subject to error. We certainly hope the USDA’s September estimates are the more correct ones.

Our domestic demand index for pork for January-August was up 3.9 per cent at the consumer level but live hog demand was down 4.7 per cent for these 8 months compared to a year ago. The weaker live hog demand than consumer demand was due to 20 per cent smaller exports in 2009 than 2008.

There is some chance that both consumer demand and live hog demand this winter and into 2010 will be positive, especially live hog demand compared to the first 7 months of 2009. This hope is based on a stronger general economy and a weaker US dollar which is positive for exports. There are also some potential storm clouds. What will be the reaction of consumers and importers if we get some swine herds developing H1N1 flu this fall and winter?

The retail price of pork in August was down 0.8 per cent from July and down 2.8 per cent from August 2008. However, for the first 8 months of 2009, retail pork prices were 1.8 per cent above last year.

Only the processor-retailer benefitted from these higher retail pork prices. The retailer-processor margin was up 12.4 per cent for January-August 2009 compared to the same period in 2008. The packer margin was down 6.1 per cent for these 8 months and live hog prices were down 15.5 per cent compared to a year ago.

Pork exports for January-July were down 19.3 per cent from 12-months earlier. The good news is that July exports were above June and down only about 10 per cent from last year. Net pork exports as a percent of production at 14.2 per cent was down from 17.9 per cent for January-July 2009 compared to 2008.

The value of pork exports and variety meats per hog slaughtered for January-July at $39.08 per hog was down over about 5 per cent from the same period of 2008. The value of variety meat exports per hog for January-July of this year was $6.70 compared to $5.40 last year.

Our slaughter estimates for October-December based on the 60-179 pound market inventories is for a decline of 1.9 per cent from last year. With this level of production, we expect 51-52 per cent lean hogs, live, to average in the low to mid-$30s and non-packer-sold hogs to average in the upper $40s in the carcass.

For the first quarter of 2010 we expect slaughter to be down 3.7 per cent from a year earlier, 51-52 per cent lean hogs to average the upper $30s live, and non-packer-sold carcass hogs to average in the low $50s.

Our sow and gilt data indicated a speed-up in the decline in the breeding herd in mid-August. If this is occurring and continues, there is a possibility that production will be down more in the last half of 2010 than in the first half.

USDA said pigs per litter were up 2.0 per cent in June-August, the smallest quarterly increase since the spring of 2008. Farrowing intentions point to a reduction of about 3.2 per cent for this fall and winter.

Productivity growth in pig numbers should nearly offset reduced hog imports, therefore marketings in the second and third quarters of 2010 will likely be down about as much as the reduced farrowings.

Our estimates of slaughter and prices for the next four quarters are in Table 4.

Further Reading

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