U.S. pork producers have should be applauded for their discipline in terms of cutting the breeding herd for five consecutive quarters. However, the payoff has been slow. Several factors have impeded that progress, says Chris Hurt, Purdue University Extension marketing specialist.
"The outlook is for modest losses this fall and winter, with some small profits next spring and summer," he notes. "The negative market factors include increased flow of hogs and pork from Canada due to the restriction of beef imports and higher corn and soybean meal prices than were anticipated."
Although USDA's September Hogs and Pigs Report had few surprised for the market, the fact remains that hog numbers and pork supplies will be somewhat higher than previously anticipated.
True, the breeding herd as of Sept. 1, was down 3 percent from last year's level, but farrowings will not decline as much. This summer's pig crop fell only 2 percent short of 2002 levels, and fall farrowing intentions are down only 1 percent, with winter intentions equal to the previous year.
"The breeding herd has been in a reduction phase following financial losses in the second half of 2002," notes Hurt. "Normally, one would expect the herd to stay below year-earlier levels for about six to eight months."
The market-hog category on Sept. 1, was down 2 percent, but the number of pigs heading to market this fall and winter will be only about 1 percent lower. You can expect marketing weights to be higher, so total fall/winter pork supplies may be unchanged or down only slightly. For spring and summer 2004, supplies are expected to increase by about 1 percent.
Most major production states reported declines in breeding herd numbers. In percentage terms, Indiana had the largest decline at 9 percent, Iowa was down 7 percent, Missouri down 6 percent, Ohio down 3 percent and Illinois dropped by 2 percent.
Major states that held the breeding herd steady or grew, includes North Carolina (unchanged), Minnesota up 2 percent and Nebraska up 4 percent.
"This summer's hog prices were influenced by large increases in hog and pork imports from Canada, as North American markets adjusted to restricted beef flows from Canada due to BSE there," notes Hurt.
"Last year, total live-hog and pig imports from Canada were 5.9 percent of the U.S. slaughter. They will be closer to 6.5 percent this year," he says. Keep in mind, that Canadian hog imports made up more than 8 percent of U.S. slaughter this summer. Processed pork imports have been up as well, running 16 percent higher for the year.
Hurt believes the flow of Canadian hogs and pork will diminish in coming months. USDA will allow beef muscle-cut imports from cattle less than 30 months of age to enter the United States.
"The value of the Canadian dollar also has increased (by 14 percent), which will make shipments from Canada to the United States less favorable," says Hurt.
He projects fall live-hog prices to be $36 to $40 per hundredweight; winter prices about $1 higher; and spring/summer 2004 prices in the $39-to-$44 range.
"Production costs are estimated at $39-to$41 per hundredweight on a live-weight basis for the next year," he concludes.