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CME: Canadian Hog Industry Still in Contraction Mode

by 5m Editor
1 November 2010, at 12:50am

US - Statistics Canada released on Thursday, 28 October, the results of its quarterly survey of Canadian hog operations, write Steve Meyer and Len Steiner.

The data confirmed what we have observed for some time: the Canadian hog industry remains in contraction mode, steadily reducing the breeding herd and shipping less pork and hogs to export markets. The reductions in Canadian numbers have contributed to the overall decline in the North American pork production base at a time when world pork demand for North American pork has actually improved. The smaller Canadian supply will likely underpin firm pork and hog values for pork in 2011. Given expectations for high feed prices and a strong Canadian currency, it will be difficult for Canadian producers to reverse current trends in 2011. Below are some of the highlights from this report:

  • The total Canadian hog inventory as of 1 October was 11.854 million head, 101,000 head or 0.8 per cent lower than a year ago. The year over year decline in the total inventory may have slowed down in the last couple of quarters but it is important to keep in mind that current Canadian hog and pig inventories are down 3.3 million head or 22 per cent since Q3 of 2005. The combined US and Canada inventory now stands at 76.845 million head, 2.3 per cent lower than a year ago.

  • If total inventories provide an indication of the current size of the industry in both US and Canada, the breeding herd offers a glimpse of potential future supplies and the outlook for the pig crop in 2011. One thing to keep in mind, however, is that the increase in pigs per litter has offset somewhat the negative impact of lower sow numbers. The total inventory of breeding animals in Canada as of 1 October was 1.298 million head, 51,300 head or 3.8 per cent lower than a year ago. The breeding herd in Canada is now down 21 per cent compared to 2005 levels. The combined US and Canada breeding herd is now estimated at 7.068 million head, 2.2 per cent lower than a year ago. The Canadian pig crop for the period Jul - Sep was 6.973 million head, 4.6 per cent lower than the previous year. Farrowing intentions down - 3.7 per cent for Oct - Dec and down - 4.6 per cent for Jan - Mar 2011.

  • Eroding profitability in the hog industry is part of the reason for a smaller number of hog operations in Canada. The top chart below the number of farms reporting pig inventories by quarter since 1997. The most recent data shows 4,430 farms reporting in the East, down about 56 per cent from the number of farms reporting in 1997. In the West, as of 1 October there were about 2,605 farms reporting pig inventories, compared to 10,160 farms back in 1997, a 75 per cent decline. Lower profits have led to significant consolidation both in the US and Canada, trends that will likely continue, albeit at a slower pace going forward.