CME: US Swine Breeding Herd Contracting Slowly

25 September 2012, at 1:29pm

US - A story published by quoting Britain’s National Pig Association saying a “world shortage of pork and bacon next year is now unavoidable“ got the attention of a number of US news outlets on Monday, write Steve Meyer and Len Steiner.

Several of them ran related stories and a few even called us to discuss the sudden revelation that world pork production will decline in the face of higher feed costs. It’s good to know that the rest of the world is discovering what DLR readers have known for a long time.

The story does cite significant declines in European sow herds over the 12 months that ended in June. The declines range from 1.3% in Germany to a staggering 13% in Italy. Sow herds in EU pig industry leaders Denmark, France and Netherlands have declined by 2.3%, 3.2% and 3.6%, respectively, during that 12 months. The story correctly cites high feed costs as the driver but then goes on to attribute those increases only to low global output of corn and soybeans. There was no mention of the increase in corn-based ethanol output that actually launched the cost increase back in 2007.

The U.S. swine breeding herd is likely contracting but the rate is apparently slow at the present time. We’ll get a fresh read on this situation on Friday when USDA releases its quarterly Hogs and Pigs Report at 3:00 p.m. EDT. Pre-report estimates will likely be released by wire services tomorrow or Wednesday. Watch DLR for those important figures.

The latest actual sow slaughter data that we have is for the week that ended September 7, Labor Day week. Total U.S. slaughter that week was 53,600 head, 6.3% more than last year’s 50,400 head. This marks the eighth time in nine weeks in which sow slaughter was higher than year-ago levels but the increases of the last two weeks were modest when compared to the surge in July. Part of the higher sow numbers is, we believe, due to higher imports of cull sows and boars from Canada. We say “we believe“ because USDA has not released any livestock import data since September 1 and warns that data back to August 18 may be revised. Sow/boar imports jumped in mid-July. We think higher imports from Canada account for about half of the increase for the week of September 7. The sow purchase data from mandatory price reporting suggest that the two weeks since September 8 have seen LOWER sow slaughter than last year. On the other hand, the percentage of gilts in weekly barrow and gilt slaughter increased sharply in the weeks ended September 7 and 14. The sampling technique used by the University of Missouri and its cooperating packers to generate these data can sometimes generate “outlier“ observations but having two of the highest weekly figures back to back suggests that producers are indeed retaining fewer gilts.

USDA’s quarterly Grain Stocks report will also be released Friday. The results of Bloomberg’s pre-report survey of 29 market analysts appear in the table below. Note that this report will provide the official estimate for stocks at the end of the marketing year for corn and soybeans. USDA had forecast those numbers to be 1.180 billion and 130 million for corn and beans, respectively, in its September World Agricultural Supply and Demand Estimates. Analysts expect the final number for corn to be slightly lower at 1.145 billion and for the final soybean stocks number to be equal to the USDA forecast.

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