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|July 2, 2007|
Special Edition: Hogs & Pigs Report
USDA's Quarterly Hogs & Pigs report, released Friday afternoon, June 29, contained no big shocks that will move hog markets drastically this week. The key data from the report appear in Table 1 below. A few highlights:
Slaughter Numbers Up
Slaughter was 4.3% higher last week than during the same week one year ago. That's 5.7, 5.7 and 4.3, respectively, the past three weeks. Those are big increases when 180-lb. and over inventories were just 3% higher. June slaughter (adjusted to equalize weekdays and Saturdays in 2007 and 2006) was 3.7% higher this year.
Finally, we have to consider the impact of higher imports of Canadian pigs. Higher feeder pig imports have added 0.4% to U.S. slaughter this year. Those pigs would be counted in these inventories and thus that 0.4% would be part of our forecast based on these numbers through August. But, assuming imports continue above last year at the same pace, we have to add that 0.4% to slaughter forecasts from September through year-end to account for this growth.
More concerning, imports of Canadian market hogs have been 12,000 to 15,000 head/week higher since mid-May. That adds 0.7% to U.S. slaughter, and we would have to begin adding that amount immediately, since those hogs are not included in the U.S. inventories.
My predicted weekly slaughters, shown in Figure 2, are based on the June Hogs and Pigs Report and a continuation of year-to-date (YTD) increases in imports from Canada.
The bottom line is that hog slaughter will be 2 to 2.5% higher through Q3 and 2.5 to 3% higher in Q4, even without a supply-enhancing effect from circovirus vaccines. With hog demand steady with 2006, those increases would put Q3 national net weighted average prices in the mid-$60s/cwt. carcass and Q4 prices in the upper $50s/cwt. carcass.
Good News, Bad News
The good news on Friday was that we have nearly 93 million acres of corn planted. That could push this year's corn crop to nearly 13 billion bushels and push year-end stocks to nearly 1.4 billion bushels. Corn futures prices fell 5 to 10 cents on Friday.
The bad news was over 3 million fewer acres of soybeans were planted than had been estimated in March. That news sent soybean meal markets to near $9/bu., and put $10 to $13/ton on soybean meal.
Still, the grains markets of the past two weeks have been kinder and gentler to livestock producers than they have been for most of the last year. As Figure 3 shows, projected corn-soy costs have fallen by $20 to $30/ton in just the last two weeks. Continued positive news for corn development could push these costs lower, even if the soybean situation is tight. Corn prices affect hog costs at a ratio of about 1:5 -- a $1 change in corn price causes a $5 change in hog costs/cwt., live weight. Soybean meal has a smaller impact with a $10/ton change impacting hog costs by about $0.35/cwt., live.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
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Dale Miller, Editor, National Hog Farmer
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