Hog Prices Show Encouraging Signs

The first quarter of 2010 had some encouraging hog prices. Barrow and gilt prices reached the highest levels since fall 2008, and sow prices briefly reached record levels.

The price for 500-pound and heavier sows normally averages 85 percent to 90 percent of the price of barrows and gilts. But since August 2008, heavy-sow prices have averaged higher than barrow and gilt prices. 

Why?  Reduced sow slaughter is one reason. Sows made up only 2.9 percent of U.S. hog slaughter in 2009, the lowest annual share ever. The recession and high unemployment is a second reason. Most sows are processed for whole-hog sausage. The recession has helped prices of low-cost, convenient cuts like sausage, relative to more expensive cuts like spareribs.

Prices Respond to Light Weight

Several factors kept hog prices low in 2009. One was extra carcass weight. The average dressed weight of barrow and gilt carcasses last year exceeded 2008 by more than 2 pounds. Thus far in 2010, weights are 1.5 pounds lighter than in 2009. Last year’s weights were boosted in part by cooler-than-normal summer weather. 

Why are hogs going to market so much lighter today? Feed quality is a prime suspect. There is a lot of talk about slow rates of gain due to poor-quality corn from the wet fall harvest. But whatever the reason, lighter weights mean higher prices.

Canadian Imports Remain on  Downward Trend

The United States imported a record 10 million Canadian hogs in 2007 but only 6.4 million last year. Hog imports are expected to drop another 10 percent or so this year. 

The number of hogs coming south is dropping for three primary reasons. The Canadian pig crop has declined for 10 consecutive quarters, so fewer hogs are available for import. The Canadian dollar is expected to be strong in 2010, making exporting less attractive to Canadians. Finally, the regulations surrounding country-of-origin labeling make handling Canadian-born hogs less attractive to Americans. Fewer hog imports means the drop in U.S. hog slaughter will be greater than the pig crop decline.