February 19, 2007

 

Rise In US Sow Kill, Pig Imports Show Feed Cost Concerns
 

 

Increases in U.S. sow slaughter and imports of feeder pigs from Canada indicate swine producers in both countries are concerned about high feed costs.

 

U.S. sow slaughter for the first five weeks of the year is up 5.7% from a year ago in actual terms, while preliminary figures for feeder pig imports from Canada as of the week-ended Feb. 10 show an increase of nearly 50,000 head, or 7.6%, according to the U.S. Department of Agriculture.

 

A number of livestock market managers and other hog buyer sources said several of their mid-size to smaller hog producer customers have talked about selling their breeding animals and exiting the business due to high feed costs and outlooks for corn prices to remain high for the foreseeable future.

 

Corn prices at the Chicago Board of Trade rose more than 70% in 2006, and the March corn contract is currently trading at $4.16 1/2 a bushel as of 1:15 p.m. EST (1815 GMT) Friday.

 

Glenn Grimes, agricultural economist at the University of Missouri, said there was a boost in the number of sows marketed in the latest week of actual slaughter data, which was the week-ended Feb. 3, that raised the year-to-date weekly average. Gilt slaughter data so far indicate that producers aren't holding back young female hogs to be added to the breeding herd.

 

However, Grimes said it is too early to draw any conclusions with confidence as to whether the increased sow slaughter will continue but added that he will be closely watching the data in the weeks ahead.

 

For some industry sources, the rise in sow slaughter wasn't surprising based on the reports of sales or plans to sell that they had heard from producers.

 

With feed costs rising and hog prices for the year forecast to barely cover or be below the cost of production, some farmers will get out of the hog business and produce crops only, said a veteran livestock buyer in the western corn belt. Similar comments were heard from buying station managers and other sources elsewhere across the Midwest. For some, that may also mean leasing their production facilities to someone else in the business. But, how many of them will follow through is uncertain.

 

The high feed costs also may be contributing to the rise in feeder pig imports from Canada, compared with a year ago, sources said. A combination of strength in the Canadian dollar, high feed grain prices and seasonal fluctuations in slaughter hog prices have squeezed margins for producers in Canada. Meanwhile, demand for pigs from U.S. hog finishing units has been relatively strong despite the higher feed costs.

 

Live swine imports from Canada for 2007 through the week-ended Feb. 10 are already above 1.0 million head and are up about 78,600, or 8.2%, from the same period a year ago. Feeder pigs account for about two-thirds of the total and represent 63% of the increase from a year ago. These pigs require approximately 5 1/2 months on feed on U.S. farms before reaching slaughter weight, so the pigs imported early this year will be shipped to slaughter during June and July.

 

In 2006, live hog imports from Canada accounted for approximately 8.4% of U.S. hog slaughter.