September 4, 2012

Due to rising corn and soy prices and declining producer profitability for 2012, the hog industry is slowly shrinking as evidenced by the recent upswing in weekly sow slaughter.

The larger number of cull sows over August pushed year-to-date slaughter levels to about 1% less than a year ago, when it was down over 2% in the first half of 2012.

As of week-ending August 11, year-to-date Federally Inspected (FI) sow slaughter, as reported by USDA-NASS, totalled 1.79 million head. Since early July, weekly slaughter levels have averaged over 6% (or about 18,000 sows) above a year ago. By the end of July, sow slaughter was above 60,000 head per week and have remained so since. For week-ending August 4, weekly slaughter was 13% higher than the corresponding week in 2011 and the largest of any week since mid-December of last year.

As a result of recent sow slaughter levels, the September 1 USDA's Quarterly Hogs and Pigs report (to be released September 28) is expected to show a smaller breeding herd relative to the prior quarter. That trend is forecast to persist well into 2013.

As for the US sow slaughter numbers, including imports from Canada, the hog industry is affected there as well. Breeding herd liquidation in Canada has picked-up in recent weeks as indicated by industry reports and by over-year increases in the number of sows sent to the US for slaughter. The recent trends suggest fewer Canadian feeder pigs may be sold to US growing operations.

Increased pig slaughter this year will be reflected in a smaller supply of slaughter hogs in the second half of 2013. Sow performance (i.e. pigs per litter) should remain high as producers mostly cull lower performing animals. Still, US quarterly hog slaughter is forecast to post significant on-year declines in the third quarter of 2013.

Slaughter hog weights likely also will be reduced by record high feedstuff costs in much of 2013. So, US pork production in the third quarter of 2013 will be the smallest for that quarter in five years. US pork output could post on-year declines into early 2014.