September 2003
Since U.S. hog producers have been cutting back on the size
of the breeding herd for five consecutive quarters, they
hoped to be operating with solid profits by this point.
However, several market factors have gotten in the way,
and now the outlook offers modest losses this fall and winter,
with some very small profits next spring and summer. Those
market factors have been the increased flow of hogs and
pork from Canada due to the restriction of beef imports,
and higher corn and soybean meal prices than had been anticipated
a few months ago.
Hog numbers and pork supplies will be somewhat higher than
had previously been anticipated according to latest Hogs
and Pigs inventory report from USDA. While the breeding
herd remains three percent smaller than last year, there
are indications that farrowings will not be down as much.
The summer pig crop was only down by two percent, while
fall farrowing intentions are down only one percent, and
winter intentions are unchanged. The breeding herd has been
in a reduction phase after financial losses in the last-half
of 2002. Normally, one would expect the herd to stay below
year-earlier levels for about 6 to 8 quarters.
The market herd was down two percent, but pigs available
for marketing this fall and winter will be closer to one
percent lower. Marketing weights will likely be somewhat
higher, so total pork production this fall and winter may
be unchanged to down modestly. For the spring and summer
of 2004, supplies are expected to begin to climb once more
by perhaps one percent. More pork is not what hog producers
want to see, as prices may still have to be below costs
of production for portions of this fall and winter.
The breeding herd was lower in most major production states.
In percentage terms Indiana had the largest breeding herd
decline at nine percent, Iowa’s herd was down seven
percent, Missouri was down six percent, Ohio down three
percent, and Illinois’ breeding herd dropped by two
percent. Major states with unchanged or increasing numbers
included North Carolina as unchanged; Minnesota with a two
percent increase in their breeding herd, and Nebraska’s
herd was up four percent.
This summer’s hog prices have been influenced by
a large increase in hogs and pork coming from Canada as
the North American beef and pork markets adjusts to restricted
beef flows from Canada due to BSE there. Hog imports from
Canada include both young pigs that are fed-out in the U.S.
and slaughter hogs. Last year, the total live imports were
5.9 percent of total U.S. slaughter. That number will be
closer to 6.5 percent this year. However, this summer, total
live imports were over eight percent of U.S. slaughter.
USDA reports that processed pork imports have been up as
well. In June and July, pork imports from Canada were higher
by 14 percent over the same months in 2002, and are up 16
percent for the year.
The flow of Canadian hogs and pork should diminish in coming
months. The USDA has approved importation of muscle beef
cuts from cattle under 30 months of age, and has a permit
process in place to allow more beef to enter the U.S. In
addition, the value of the Canadian dollar has increased
by 14 percent in 2003, which will make shipments from Canada
to the U.S. less favorable over time.
Fall hog prices are expected to average in the $36 to $40
range on a liveweight basis. Winter prices are expected
to be about $1 higher. Spring and summer 2004 prices are
expected to average in the $39 to $44 range. Costs of production
is estimated at $39 to $41 per live hundredweight over the
next year, thus operating returns are expected to show a
$1 to $2 loss in the fall and winter, but a similar level
of profits next spring and summer.
Chris Hurt
September 29, 2003
Purdue University
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