January 7, 2002
REPORT PROVIDES HOPE FOR PRICE RECOVERY
were on a roll for the first three quarters of 2001, when hog
prices averaged nearly $49 per live hundredweight. Then came
the final quarter, with supplies increasing by more than 4 percent
and prices plunging to an average of only $37. Some of the mystery
of that final quarter was solved in the USDA's December Quarterly
Hogs and Pigs report. The USDA increased the estimated size
of the spring 2001 pig crop by 1.3 percent to account for a
portion of the larger than expected supplies. The other factors
contributing to the large amount of pork are a 1.1 percent increase
in weights and increased imports of hogs from Canada.
prices mount a winter rally? The USDA report provides evidence
that supplies will moderate and prices recover, however, doubts
will linger until the actual slaughter rate tapers off. Inventory
data from the report indicate that the number of pigs to be
slaughtered in January and February should be down 1 percent
and that the March through May rate should be unchanged to down
slightly from that of last year. If so, prices will likely recover.
The alternative is that the USDA has not registered sufficient
expansion in last summer's farrowings (down1.8 percent) and
fall farrowings (up only .3 percent). This is especially true
since the spring 2001 farrowings were up 1.3 percent. If the
farrowings were up that much last spring, one might reason they
would continue to grow in the summer and fall and that supplies
will be larger than indicated by the current inventory numbers.
As always, we will only know as actual slaughter is registered
this winter and spring.
also some seemingly mixed messages in the farrowing intentions
numbers in the report. Producers said they will increase farrowings
by a lively 3.4 percent this winter, but by only 1.2 percent
in the spring. Again, it is unusual to see the herd in that
large of expansion and for the rate of increase to decline that
early in the expansion phase.
imports from Canada also contributed to the lower prices in
the final quarter of 2001. Over the past three years, Canada
has provided increasing numbers of pigs to the U.S. even in
the face of declining sow numbers here. In 2001, the U.S. imported
about 5.4 million hogs from Canada, or 5.5 percent of the total
slaughter. An increasing portion are SEW pigs, coordinated with
nursery and finishing units in the U.S. About 60 percent of
the imports last year were of younger pigs as compared to market
hogs. While exact trade data lag about two months, it is likely
than rising Canadian imports played at least some role in the
depressed late-year prices. Forecasts from USDA are for the
number of pigs from Canada to rise another 4 percent this year,
to 5.6 million head. Canada provides open spaces for health
sensitive farrowing, while the Western Corn Belt provides cheap
feed, abundant crop land for spreading hog waste, and strong
demand from packers.
the past year, the size of the breeding herd continued to slip
in the Eastern Corn Belt, although both Illinois and Michigan
maintained the same size herd. Indiana saw an erosion of 8 percent
in the size of the breeding stock, Ohio numbers were down 6
percent, and Wisconsin's breeding herd was down 13 percent.
In total, these three states lost 55,000 animals from their
breeding herds. The largest growth state in numbers was Texas,
which added 15,000 animals to the breeding herd. Arizona added
12,000, as some herds were repopulated there.
numbers continued to drop, while the average size of farm grew
still larger. The number of farms that had hogs sometime in
2001 decreased 6 percent, to 81,130 farms. Hog farm numbers
are now down 52 percent since 1995, and down 70 percent since
1990. The number of farms with less than 1,000 hogs in inventory
represented 69 percent of all farms, but only 13.5 percent of
all inventory. The very large farms continue to grow in importance,
with those having 5,000 or more hogs now representing 52.5 percent
of all the hogs. In 1996 these large farms controlled 33 percent
of the inventory.
for 2002 will be up about 1 percent if the USDA report is correct.
This would range from down 1 percent in the first quarter, up
1 percent in the second and fourth quarters, but up over 4 percent
in the summer time, as a result of the large increase in winter
for 2001 averaged $45.78, on a liveweight basis, for 51 to 52
percent lean animals. Prices are expected to drop about $3 per
live hundredweight in 2002, to somewhat under $43 for an average.
Prices are expected to recover to the very low $40s for a first
quarter average. A return to reasonable profits is expected
for the second quarter, with prices in the mid-to-upper $40s.
Third quarter prices may fade somewhat, with averages for the
quarter expected to be in the $42 to $46 range. By the end of
2002, prices may once again dip below costs of production at
times, as prices are expected to average between $35 and $39
in the final quarter.
questions now are just what is the magnitude of the breeding
herd expansion? and were farrowings actually larger last summer
and fall than are now being reported? If they were, the price
recovery will be less vigorous.