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CME: Current-Year Slaughter Down from Last Year

by 5m Editor
24 June 2010, at 3:29am

US - USDA’s quarterly Hogs and Pigs Report will be released Friday afternoon and analysts expect the inventory numbers to be substantially lower than last year across the board, write Steve Meyer and Len Steiner.

The results of Dow Jones’ pre-report survey appear in the table below. There is not a great deal of disagreement regarding the three broadest numbers in the report, with only about 1.5 per cent separating the highs and lows for all hogs and pigs, breeding herd and market herd. Estimates for the March-May farrowings, pig crop and pigs saved per litter are even tighter while there is a bit more disagreement over the number of sows producers intend for farrow over the next two quarters.

One “test” that is useful is a comparison of June 2010 slaughter to June 2011 slaughter using daily slaughter data/estimates. That comparison says current-year slaughter is down 1 per cent from last year. There are 5 weekdays and one Saturday remaining in this month, the same as there were at the same time last year. Imports of Canadian market hogs, which show up in slaughter data but are never counted as part of US inventory, were only 3,573 head lower this year, making basically no difference in the year-on-year comparisons. All of this leads me to think that the analysts’ estimate of the number of hogs in the 180-lbs. and-over category is too low.

The Hogs and Pigs Report will be released at 3:00 p.m. EDT on Friday. Watch Monday’s Daily Livestock Report for details and analysis.

What do these numbers say about the US pork production sector? Let’s consider some implications as presented in the chart at right which shows the quarterly US breeding herd and quarterly slaughter of US-born pigs — ie. backs out all market hogs and feeder pigs born in Canada. The high and low breeding herd estimates from Dow Jones are represented by the top and bottom of the red rectangle in the chart below while the average is marked by X.

Fiirst, if the average estimate for the breeding herd is correct, it means that the US breeding herd has actually grown by 23,000 head since 1 March. That is certainly not out of the question since total sow slaughter and slaughter of US sows have both been roughly 25,000 head smaller from the week ended March 6 through the week ended 29 May. Gilt slaughter data from the University of Missouri, though, indicates that gilt retention has been relatively low — low enough to mean that the sow herd would be hard-pressed to have grown during the quarter.

Second, the chart demonstrates that US producers have maintained pig output even as they have slashed the size of the breeding herd. The average estimate says that there were 450,000 head (6.2 per cent) fewer breeding animals on US farms on 1 June than there were at the most recent peak in December 2007. Yet slaughter during the first quarter of this year is only 3.4 per cent lower than in the first quarter of 2008 and was 7 per cent LARGER than during the first quarter of 2007 before porcine circovirus vaccines came along. A steadying or growing breeding herd will mean higher hog numbers 12-18 months hence barring any unforeseen issues with productivity.

Third, the estimates say that analysts expect market hog numbers to be lower than this year through the first half of 2011. That is not much of a surprise given the March report numbers but it also assumes that litter size growth returns to only 1 per cent. That would be the lowest rate since Q1-2007. The December-February litter size growth rate was 1.3 per cent, the first sub-2 per cent quarter since Q1-2008.