CME: Canadian Pork Industry - Signs of Improvement

21 February 2012, at 1:53pm

CANADA - Higher global pork prices and improved demand for feeder pigs from the US positively impacted the Canadian pork industry in 2012, write Steve Meyer and Len Steiner.

It is important to qualify that statement. While the Canadian pork industry is showing signs of improvement, it is still far from entering a full blown expansion phase and it remains about 20% smaller from its peak in 2005 (as measured by the size of the breeding herd). Still, modest improvements in the size of the breeding herd, producer reports of higher farrowings in late 2011 and much higher farrowings in the first half of 2012 offer further support to the view that the cycle may be turning.

Statistics Canada released yesterday the results of its quarterly survey of Canadian hog and pig operations. Below are some of the highlights from the survey and implications for Canadian pork production going forward. We will cover the Canadian cattle survey tomorrow.

The total inventory of hogs and pigs as of January 1, 2012 was reported at 12.020 million head, about 125,000 head or 1% higher than the previous year but still some 3 million head or 20% smaller than on January 1, 2006.

The Canadian sow inventory on January 1 was reported about steady compared to January of the previous year but it showed some modest improvements from the levels we saw in the July and September survey. The total inventory was pegged at 1.312 million head, just a few hundred head lower than the previous year but about 1% higher than what it was back in July 2011.

The more encouraging part is what producers expect to see in terms of productivity gains in the first half of 2012. The survey pegged sow farrowings in Q4 of 2011 at around 720k, up 0.9% from the previous year and the first year over year increase in farrowings in more than five years. The pig crop for the quarter was reported at 7.423 million head, up 4.1% from the previous year and the biggest year over year increase in the crop size since June 2004. The size of the pig crop vs. farrowings implies that Canadian producers, similar to their US counterparts, are relying heavily on productivity improvements as a way to expand production. The implied litter size for the latest reported quarter now stands at 10.3 pigs per litter, an all time record high and about 3% higher than the previous year. Canadian producers indicated that they expect significant increases in farrowings by the second quarter of 2012 although it appears to us their expectations may be a bit too optimistic. The survey pegged farrowing intentions for the Apr - Jun quarter at 722.7k, 6.6% higher than the comparable period a year ago. If this number materializes, combined with gains in pigs per litter, would imply a pig crop for Q2 of 2012 that is about 9%-9.4% higher than the previous year.