North American pig herds need to shrink more for profits

More decreases in the total hog herd in the US and Canada are expected before the North American hog industry could turn profitable again.

US and Canadian pork producers incurred heavy losses in recent years as feed costs swelled and a weak economy hurt meat demand. US producers lost a total of US$6 billion raising hogs for the past two years, while Canada's total pig herd fell 6-7% during the last quarter of 2009, as the last episode of a five-year-long trend, according to University of Missouri economist Ron Plain.

Losses must be stopped and profits must be turned in, and the key to that is fewer hogs, which mean that producers must continue reducing herds, said Plain.

Canada's breeding herd has been declining since March 2005, while the US herd has been shrinking since October 2007.

As of October 1, 2009, Canada's breeding herd amounted to 1.353 million head, down 4.3% from 1.417 million on October 1, 2008, according to USDA data. The US breeding herd as of December 1 was 5.874 million head, down 3.1%.

The industry must reduce herds for the rest of this year, but that may not happen, Plain said.

The combined US and Canadian breeding herds have declined 7.1% from an October 2007 peak of 7.752 million head. Still, that is not a large enough dent to push hog prices to consistently profitable levels, given a 20-30% increase in costs, said analysts.

The size of the breeding herd is a key indicator of pork supplies six to 18 months in the future.