U.S. hog slaughter this year is expected to be a record 117 million animals. While export sales are grabbing about one-quarter of that production and helping hold hog prices up, industry analysts say a sow herd reduction is a must.
But, recent declines in grain prices, and the firm hog price appear to be slowing sow marketings. "Our contacts indicated that sows are simply not available since corn and soybean prices fell dramatically during July and hog prices have rallied to annual highs in recent weeks," explain Steve Meyer and Len Steiner, market analysts who write the CME Group's Daily Livestock Report. "Liquidation signals are not nearly as strong as they were just a few weeks ago."
Since today's pork industry lacks the flexibility to get in an out of production, sow liquidation comes slow. Of course, there's a bit of the who-will-blink-first mentality as the players want others to cut back, so they can remain to reap rewards of the eventual profitability turn around.
U.S. sow slaughter had been running 9.3 percent higher than in 2007. Sow prices have moved to entice more sales, rallying to their highest level this year and surpassing last year's price as well as the five-year average.
Canada also has worked to do its part to reduce the North American sow herd, having established a breeding herd buyout program. Statistics Canada reports that the country's breeding herd inventory, at 1.49 million head, was down 5 percent from 2007 and 1 percent less than the previous quarter. Roughly 120,000 sows are signed up to be liquidated, however, that number may grow as the program closes on Sept. 1. Canada's goal was to reduce the herd by 150,000 head. The program requires liquidated herds to remain out of production for three years.
Reports out of Canada are that some producers have sold off sow herds but did not sign up for the buyout program because of the three-year requirement.
Also, in its production report Statistics Canada shows July 1, inventories of all hogs fell 11.6 percent from 2007 levels. That inventory is now at 13 million hogs, the lowest level since 2000.
While U.S. crop prices have dropped from their extreme record-setting highs set this summer, prices are still weighing heavily on producers' profitability. Crops in the field are making progress, but development is still behind last year and the five-year average. An early frost or other harvest challenges could push feed prices higher.