CHICAGO, Ill. – American hog futures prices fell early this week in response to a quarterly report from the United States Department of Agriculture that showed more hogs than anticipated.
The increased number of pigs on farms was a combination of higher imports of Canadian feeder and slaughter animals and an increase in U.S. pigs per litter.
Also, the report signalled that producers are starting to hold back breeding animals to rebuild herds.
“We have been bringing in enough extra slaughter hogs from Canada each week to add one percent to the weekly hog slaughter compared to a year ago,” said Ron Plain, an agricultural economist at the University of Missouri.
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USDA reported the Sept. 1 hog supply was 98 percent of a year ago at 59.623 million head, and the breeding herd was 97 percent at 5.882 million head. The supply of market hogs was 98 percent at 53.741 million.
A Reuters survey of analysts had an average trade estimate for the hog supply of 97.3 percent. The trade average for the breeding herd was 96.7 percent and market hogs at 97.4 percent.
Analysts noted that USDA did not have to adjust the June 1 inventory report because most of what took place in the market happened after June 1 when the Canadian cattle ban caused hog exports to the U.S. to rise.
“They have very cheap beef prices in Canada and we have very high beef prices in the United States so the Canadian (hog producer) says it makes more sense to ship pork south and compete against high priced beef in the States then try to keep it in Canada and compete against cheap beef up here,” Plain said.
“We are bringing in about 20,000 more slaughter hogs a week from Canada than we did a year ago,” Plain said, noting that about 35,000 slaughter hogs were imported per week last year.
Adding to total numbers was an increase in U.S. domestic production.
“We got a larger June-August pig crop than we expected by 175,000 hogs and this is because we found more pigs per litter – productivity – is increasing,” said Chuck Levitt, senior livestock analyst with Alaron Trading Corp. “The other 348,000 hogs, however, were imported from Canada and they became market hogs or they are becoming market hogs.”
USDA put third quarter farrowing intentions at 99 percent of a year ago and fourth quarter intentions at 100 percent of last year. Both were at the high end of early trade estimates.
“If we gain a little dab on pigs-per-litter or if we keep bringing in more slaughter hogs or more feeders (from Canada), we can push slaughter in the second quarter of next year easily above year ago levels. In the second and third quarter we may kill more hogs than we did this year,” Plain said.
Levitt also noted that sow slaughter was five percent less than last year and gilts held back represent six percent more. That is why the breeding herd estimate is higher.
“What this report says is we are beginning to expand the breeding herd,” Levitt said.
