July 20, 2009

The second quarter of 2009 ended with both US pork production, hog and pork prices below a year ago, a combination that strongly suggests lower product demand.

USDA estimate for second quarter 2009 commercial pork production, 5.5 billion pounds, is about 1.7-percent below second quarter 2008.

Live equivalent prices of 51-52 percent lean hogs averaged US$42.74 per cwt for the quarter, almost 19-percent below a year ago. USDA estimated pork carcass cutout for the second quarter of 2009 proxy for wholesale value averaged more than 22-percent below the same period in 2008.

Lower supplies of hogs and pork can yield lower hog and wholesale pork prices, only when packer demand and wholesale demand have declined.

Lower production and lower prices are expected to persist for the balance of this year. Both third and fourth quarter commercial pork production is expected to be lower than a year ago.

The third quarter production estimate, 5.47 billion pounds, falls almost 3-percent below a year ago. Fourth quarter production is expected to be 6 billion pounds, or almost 2 percent below last year.

Lower quarterly estimates for the second half of 2009 are a product of expected lower year-over-year hog slaughter, which in turn derives from lower farrowings and lower live imports from Canada.

Higher estimates for average dressed weights, from lower expected feed costs, are expected to mitigate slightly the decline in slaughter numbers.

Soft product demand, both domestic and exports reflected in estimated second half 2009 hog prices: third quarter prices are expected to average between US$44 and US$46 per cwt, more than 21-percent below third quarter 2008.

Fourth quarter prices are expected to average between US$39 and US$41 per cwt, almost 5-percent below last year.

For 2010, commercial pork production is estimated at 22.5 billion pounds, more than 1 percent below 2009. Hog prices next year are expected to average between US$46 and US$50, almost 13-percent above prices this year.