High feed prices brought on by the 2012 drought have spiked hog slaughter to its highest level for the current year as U.S. pork producers search for ways to reduce their skyrocketing feed bills. As a result, more hogs are arriving at the nation’s packing plants.
“Last week’s federally-inspected hog slaughter came in at a huge 2.265 million head, the highest level of the year and up a whopping 6.7 percent from one year ago,” according to Steve Meyer and Len Steiner, authors of the CME Group’s Daily Livestock Report.
Hog slaughter the last couple of weeks reflects the significant increase in sows arriving at processing facilities. “According to data from the University of Missouri, sow slaughter is running 10 percent or more above a year ago,” says Rich Pottorff, Doane chief economist.
Pottorff believes the trend will continue through the fall season further weighing on hog prices for the remainder of 2012 and into first quarter of 2013. “Sow slaughter is expected to stay high for at least the next couple of months,” he says. “Futures prices show big losses for hog production through this fall and winter.”
The breakeven cost for hog production over the next twelve months will be around $185 to $190 per head, says Mark Greenwood, vice president relationship management, AgStar Financial Services, Mankato, Minn. “Pork producers are looking at a loss of between $20 to $30 per head for the next six months.”
Pottorff also sees the negative trend continuing. “Hog prices have fallen sharply in the last few weeks and there is little chance of recovery anytime soon,” he says. “The breeding herd numbers in the USDA’s September Hogs and Pigs report will almost certainly be down from June and from last September. Farrowing intentions for fourth quarter will also be down.”
As animal liquidation grows, Greenwood says two things to watch will be sow slaughter and the number of weaned pigs entering the United States from Canada. “The economics of selling weaned pigs on the open market without a contract are abysmal,” he says. “Currently, weaned pigs are selling around $7.”