Hog Losses to Persist

Farrowing cuts may not tighten supplies and boost prices enough to bring profits.

Pork producers told USDA they'd cut September-November farrowings about 5.5% and shave December-February farrowings 2.9%.

"If, as expected, pigs per litter keep rising, then the pig crops won’t be down as much as farrowings," observes Ron Plain, University of Missouri economist. "I expect 2009 hog slaughter will be down about 3% and carcass hog prices in 2009 will average close to $74 per cwt.

"Unfortunately, the cost of production could average near $79 per cwt on a carcass basis, resulting in a loss of $5 per cwt or roughly $10 per head," he cautions.

Reviewing the numbers. USDA’s latest survey of the U.S. swine herd found lots of hogs. At 102.5% of September 2007’s level, the market herd on September 1 was the largest ever for any quarterly survey. The same was true for the total inventory of hogs and pigs, which was up 2.0% from last year. From survey responses, USDA estimated the breeding herd was down 2.6% on September 1. All these numbers were very close to the average of trade forecasts.

USDA made no big changes in their previous estimates of market hog inventories, but revised upward some of their earlier estimates of the breeding herd inventory. The September and December 2007 breeding herd inventories were increased by 60,000 head (1.0%) each and the March and June breeding inventories were increased by 50,000 head (0.8%) each.

Litter size keeps climbing. Pigs per litter in the June-August quarter averaged a record 9.51 head, up an amazing 2.4% compared to a year earlier and the 20th consecutive quarter above year-ago levels.

USDA calculated the inventory of market hogs weighing 120 to 179 pounds was up 6.1% on September 1 and the inventory of market hogs weighing 60 to 119 pounds was up 1.1%. "If these numbers are right, daily hog slaughter during the fourth quarter should average up 2%, assuming continued reduction in slaughter hog imports from Canada," says Plain. "If so, look for October-December carcass hog prices to average in the low $60s."

USDA said the inventory of market hogs weighing less than 60 pounds was down 0.3% on September 1, implying daily hog slaughter during the first quarter of 2009 will be down 1% to 2% with fewer Canadian hogs. Plain expects first quarter carcass hog prices to average in the upper $60s.

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