Pork Commentary Oct 1, 2012 U.S. Breeding Herd Liquidating

U.S. Breeding Herd Liquidating

The U.S Breeding herd on September 1^st dropped from 5,862 million sows on June 1^st to 5,788 million. A decrease of 74,000. We expect most of the decline happened in July – August after the effects of the drought pushed feed prices to record levels.  We expect the U.S herd is declining currently at about 8,000 per week. The pundits who have been saying there has been none or little liquidation have been dead wrong. Once again the cubicle ag-economists are wrong.

USDA September 1

Hogs and Pigs Report

(1,000 Head)

The breeding herd at 5,788 is only 18,000 greater than the lowest herd inventory number of March 1, 2010. At current liquidation levels we expect the U.S December breeding her number to be the lowest ever, at around 5,700. Already we expect the significant herd liquidation in Canada the USA-Canada herd has declined over 100,000 to 120,000. The USA-Canada breeding herd is the smallest ever now and dropping further every day. The dynamics

• Gilt retention has slowed
• Sow slaughter is up ( last recorded week 64,000 +)
• Summer heat killed sows that weren’t replaced
• Sow slaughter backed up – Sows in storage out of production but being held for slaughter
• Sausage is mostly a fresh product. Sows won’t be killed to store frozen meat. Only so many sows will be harvested a week, unless sausage demand warrants consequently added sows.

September 1 inventory

(1,000 head)

As we know the last few weeks have had massive marketing. The 180 pound plus category at 105 percent reflects this reality. The surge of extra market hogs has overwhelmed the market and push hog prices low. Last Thursday U.S. 53 – 54 % lean hogs averaged 74.18 per cwt. carcass a year ago they were 92.33 per cwt. carcass. That’s about $40 lower return year over year. Now throw in higher feed prices of $25 plus per head you get $65.00 charge.  Any wonder there’s liquidation. The good news is the 105% inventory should be almost all marketed. The push to lower hog weights to save feed will continue for some time, but you can only kill them once. We expect by as early as December hog volumes will be lower than a year ago. That will certainly push hog prices higher. The Canadian sow herd has been liquidating. Absolutely no doubt. Most of the liquidation has been in small pig production exporting to U.S. We expect Canada has taken out 30,000 – 40,000 sows since July 1^st. The small pigs are not going to the U.S. that explains a lower under 50 pound category despite a U.S pig crop close to a year ago. Also we expect for the last 60 days all small pigs that might have been kept alive in a more profitable environment are being eliminated. This cuts inventory and future pork supply. Summary             No doubt liquidation has happened and will continue to happen.  We expect when the dust settles the U.S – Canada combined breeding herds will be down 250 – 300,000 from June 1^st inventories. The economic losses the industry is having is real. The lower sow herd will be due to people quitting voluntarily and involuntarily and less gilt retention leading to smaller sow herds. When we spoke in the first part of July at the National Pork Industry Conference in Wisconsin, we projected that the summer of 2013 would have the highest hog prices in history.  That many producers would quit and some would go bankrupt before we got there. We haven’t changed are mind. Global hog prices are e.g. Mexico U.S. live weight .82^c lb., Brazil .60^c lb., Russia $1.37 lb., China $1.07 lb., and Spain .87^c lb. These prices reflect pork demand and general lack of supply. These prices will continue to lead to strong pork exports.  Couple this with the USDA projecting that U.S per capital supply of pork will be the lowest since 1975. In 1975 due to the spike in feed prices in 1974 hog prices jumped 30% from 34.20 in 1974 a lb. to 46.10 in 1975.  At the time the highest hog prices in U.S history.

            High feed prices always make high hog prices. Always have always will.  In 2013 the highest feed price in history will make the highest hog price in history. The challenge is getting to the promised land.

Categorised in: Pork Commentary

This post was written by Genesus