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June Quarterly Hogs & Pigs Report Analysis

by 5m Editor
28 June 2011, at 9:29am

US - USDA's June hogs and pigs report said the hog herd was slightly larger than pre-release trade forecasts, writes Ron Plain.

USDA's estimate of the total number of hogs and pigs on US farms at the start of June was 0.5 per cent larger than 12 months earlier. (See Table 1 below) The average of the pre-release trade estimates was for a 0.1 per cent increase I each of these three categories.

USDA made some minor revisions to past inventory estimates to bring them more in line with spring hog slaughter. USDA raised their previous estimate of the December market hog inventory by 300,000 head (0.5 per cent), lowered their March market hog inventory estimate by 155,000 (0.35 per cent) increased the reported number of sows farrowed during September-November 2010 by 1.2 per cent and increased the September-November pig crop by 338,000 head (1.2 per cent).

The June swine breeding herd is the largest since December 2009, but is 6.9 per cent lower than at the last cycle peak in December 2007. The US swine breeding herd has increased for three consecutive quarters. In 2010 the June breeding herd inventory was 28,000 head larger than on March 1. This year it was 15,000 head larger. Thus, USDA says the breeding herd grew by 13,000 head less this spring than last. March-May sow slaughter was down by 3,900 head compared to a year ago. Imports of Canadian sows for slaughter was down by 19,000, leaving 15,100 more US sows slaughtered this spring than last. The USDA data implies 2,100 more gilts were added to the breeding herd this spring than last.

USDA said spring (March-May) farrowings were down 1.8 per cent and forecast summer and fall farrowings to be down 2.6 per cent and 1.1 per cent, respectively, compared to 12 months earlier. (See Table 3) Spring farrowings were the same as trade expectations. The forecast of summer farrowings is 0.6 per cent lower than expected and fall farrowings are forecast to be 0.3 per cent below the trade forecast. The lack of growth is likely due to high feed costs which have pushed breakeven prices above $65/cwt (live) and $86/cwt (carcass). If USDA is right, the number of sows farrowed will be below year-earlier for 14 consecutive quarters. USDA says the breeding herd is up 0.3 per cent, but the number of litters to be farrowed in the next six months will be down 1.9 per cent. That seems an unlikely combination.

The number of pigs per litter remains high. The trade was expecting a 1.5 per cent increase, but USDA said March-May pigs per litter were 2.2 per cent higher than the same months last year. The benefit of reduced farrowings is being offset by increases in the number of pigs weaned per litter. Spring farrowings were down 1.8 per cent; but with 2.2 per cent more pigs per litter, the spring pig crop was up 0.4 per cent.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on 1 June was down 0.5 per cent compared with 12 months earlier. (See Table 2) However, it looks like June barrow and gilt slaughter will be 1.7 per cent below last year. The 120-179 pound market hog group was up 3.3 per cent from June 2010. The 50-179 pound inventory was down 0.2 per cent; and the inventory of pigs weighing less than 50 pounds was up 0.1 per cent compared to a year earlier.

Live animal imports from Canada during the March-May quarter showed feeder pigs up 2.2 per cent and slaughter hog imports down 7.6 per cent due to a 15 per cent drop in imports of sows for slaughter. In 2007, 10.0 million live hogs were imported from Canada. In 2009, 6.4 million head came south. Imports of Canadian hogs and pigs for 2010 totaled 5.7 million head. Look for 2011 imports to total close to 5.6 million head.

Based on the 50-179 pound market hog inventory and the expectation of little change in live hog imports, our forecast is for an increase of 1.6 per cent in third quarter 2011 daily hog slaughter compared to July-September 2010. With this level of pork production, we expect 51-52 per cent lean hogs to average in the mid to upper $60s live and Iowa-Minnesota negotiated sales to average close to $90/cwt on a carcass weight basis.

For the fourth quarter of 2011 we expect daily hog slaughter to be steady but total slaughter to be down 1.2 per cent due to one fewer slaughter day compared to October-December 2010 with 51-52 per cent lean hogs averaging close to $60 live, and Iowa hogs averaging in the upper $70s/cwt on a carcass basis.

With the number of litters farrowed expected to be down 2.6 per cent this summer and pigs per litter increasing by 2 per cent or so, the summer pig crop is likely to be slightly below a year earlier. We are forecasting first quarter 2012 slaughter to be down 0.6 per cent compared to a year ago. Look for carcass prices of barrows and gilts to average in the low $80s/cwt. Slaughter weights are likely to average 0.5-1.0 per cent higher next year.

The forecast 1.1 per cent decrease in fall farrowings should be supplemented by an increase in litter size to yield a fall pig crop slightly above a year-earlier causing second quarter 2012 hog slaughter to be up 0.4 per cent or so on a daily basis. Our estimates of slaughter and prices for the next four quarters are in Table 4. Our price forecasts are well below what the futures market is predicting.

Table 1. Hog Inventories June 1, US
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 2011 as % of 2010
 Market 100.5
 Kept for breeding 100.3
 All hogs and pigs 100.6
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Table 2. Market Hogs on Farms June 1, U.S.
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 Weight Category 2011 as % of 2010
 Under 50 pounds 100.1
 50 - 119 pounds 99.8
 120 - 179 pounds 103.3
 180 pounds and over 99.5
	Pig Crop
	 March-May				 100.4
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Table 3. Sows Farrowed and Farrowing Intentions, U.S.
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 					 2010 as % of 2009
 December-February 			 95.4
	 March-May 2010			 	 97.1
	 June-August 2010			 99.5
	 September-November 2010		 98.8
					 2011 as % of 2010
	 December-February			 99.4
	 March-May 2011				 98.2
	 June-August 2011			 97.4
	 September-November			 98.9%
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Table 4. Commercial Hog Slaughter and Barrow and Gilt Price by Quarter
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 --Comm. Slaughter-- ------Barrows & Gilts, price/cwt------
 Change 51-52% Iowa-Minn Non-packer-sold
Year & Million from Lean Base Net
Quarter Head Year ago Live Carcass Carcass
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2006 1 26.208 + 2.6% $42.63 $56.38 $58.37
 2 24.839 - 0.8 48.45 65.27 65.96
 3 25.810 + 1.1 51.83 68.04 69.13
 4 27.880 + 1.4 46.13 60.53 62.04
 Year 104.737 + 1.1 47.26 62.54 63.86

2007 1 26.684 + 1.8% $46.04 $59.90 $62.69
 2 25.526 + 2.8 52.55 69.45 71.39
 3 26.566 + 2.9 50.34 66.14 69.17
 4 30.396 + 9.0 39.44 52.08 56.83
 Year 109.172 + 4.2 47.09 61.91 65.04

2008 1 29.601 +10.9% $39.64 $52.49 $57.41
 2 27.941 + 9.5 52.51 70.43 72.24
 3 28.696 + 8.0 57.27 75.67 78.05
 4 30.214 - 0.6 41.92 55.60 61.38
 Year 116.452 + 6.7 47.83 63.58 67.27

2009 1 28.503 - 3.7% $42.11 $57.23 $60.43
 2 27.072 - 3.1 42.74 57.32 61.76
 3 28.428 - 0.9 38.90 51.43 56.68
 4 29.615 - 2.0 41.20 54.98 57.64
 Year 113.618 - 2.4 41.24 55.23 59.11

2010 1 27.630 - 3.1% $50.41 $66.81 $68.32
 2 26.074 - 3.7 59.60 79.04 79.42
 3 26.930 - 5.3 60.13 79.44 80.70
 4 29.626 + 0.1 50.11 65.21 69.26
 Year 110.260 - 3.0 55.06 72.62 74.47

2011 1	 27.486 - 0.5	 $59.94 $79.28 $80.63
 2*	 26.063 - 0.0	 68.26	 91.90		92.10
 3** 27.360 + 1.6	 65 - 69 86 - 91	 88 - 93
 4** 29.270 - 1.2	 57 - 61 75 - 80	 77 - 82
 Year** 110.079 - 0.1	 63 - 65 83 - 86 	 85 - 88

2012 1** 27.330 - 0.6	 $60 - 64 $79 - 84	 $81 - 86
 2** 26.170 + 0.4	 65 - 69 85 - 90	 87 - 92
 *estimated
 **forecast
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