October 4, 2010

Lower US hog inventory boost producer profitability

Hog and pig inventories continue to decrease in the US, which pushes prices back into a profitable level for hog producers in the next several quarters.

The third quarter hogs and pigs inventory on September 1 was 65 million heads, which is down 3% from a year earlier but up one% from the second quarter.

The breeding herd is at 5.77 million heads, down 2% from last year. The market hog inventory is at 59.2 million heads, down 3% from 2009 levels but up 1% from the previous quarter.

Analysts said the breeding herd is the lowest on record with the previous low being four years ago. University of Missouri livestock economist Ron Plain said the pigs per litter number did not increase as much as expected, but had a 1.1% increase over last year, at 9.81 pigs per litter.

Economists also said market hog numbers are close to what was expected by pre-report figures. Producers seem to be staying current on their marketings with fewer heavy hogs being marketed and fewer lighter weight hogs being marketed also.

Prices are expected to move up in the coming months. Analysts expect the fourth quarter of 2010 to show prices of US$74-76 per hundredweight. For the first quarter of 2011, prices are expected to be US$75-78 per cwt.; second quarter expected to be US$83-86 per cwt.; and third quarter expected to be US$80-82 per cwt.

In the past few months profits have been exceptional, with an average profit of US$30 per head and in part of August, profits in the US$35 per head range.