January 7, 2009

US imports of slaughter-ready barrows and gilts from Canada during the first quarter of this year are projected to be down about 40,000 per week compared with the same period a year ago.

Imports of barrows and gilts directly for slaughter during the first quarter of 2008 averaged about 55,000 head per week. Since that time, the number of slaughter hogs as well as feeder pigs shipped in from Canada has declined sharply. Hefty losses financially by Canadian producers fuelled by record high feed costs, surplus supplies and an unfavourable exchange rate for Canadian producers selling to US packers led to a sow buyout program initiated by the Canadian government last spring. The buyout program targeted reducing the breeding herd by 10 percent.

Upon the implementation of the US mandatory Country of Origin Labelling law in late September, some packers announced they would purchase and process only US born and raised hogs. Others plan to process Canadian-born hogs but will schedule certain days or shifts to handle those animals. Uncertainty created by the COOL program and reduced demand for Canadian-born hogs have also contributed to the reduced imports.

In 2007, more than 10 million Canadian hogs and pigs were imported by the US. The preliminary figure for last year was about 9 million head. Taking the fourth quarter only and annualizing that figure would suggest 2009 live swine imports may be only around 6.5 million to 7 million head, the lowest since 2002.

Non-holiday weekly imports of barrows and gilts during the fourth quarter of 2008 averaged only around 17,400 head.

Analysts said a decline of 40,000 hogs per week would represent about 1.75 percent of the expected slaughter. The weekly average slaughter during the first quarter last year for non-holiday periods was about 2.275 million head.

Ron Plain, agricultural economist at the University of Missouri, told Dow Jones Newswires that reduced imports of live hogs from Canada could result in US slaughter for January and early February being slightly below a year ago. The US Department of Agriculture's latest quarterly hogs and pigs report projected slaughter during that period to be about even with a year ago.

Smaller slaughters would be supportive for prices, but the extent of the support could be determined by the strength in domestic and export demand for the pork, analysts, brokers and livestock dealers said. If demand wavers, it may take more of a reduction in slaughter to move pork prices up significantly.

Wholesale pork prices on December 30 hit a 5 2/3-year low at US$54.49 per hundredweight, but they rallied in two of the last three days to US$55.62 on Monday (January 5).