US hog herd seen at three-year low amid losses

US hog producers continued to reduce their herds in 2009 amid ongoing losses, with supplies as of December 1 expected to be the smallest in three years as a result.

Poor pork demand due to the economic recession and high unemployment, as well as the outbreak of AH1N1 flu, combined to pressure hog prices. Hog prices were down 25% in the first eight months of 2009, but a late year rally produced a 6% year-to-date gain.

The lack of producer profitability in 2009 suggests there should be a further reduction in the US sow herd, said Erica Rosa, agricultural economist with the Livestock Marketing Information Centre.

The USDA will issue the year's final quarterly hogs and pigs report on Wednesday, with analysts expecting the report to show the hog herd declining for the fifth consecutive quarter.

Even if USDA's numbers match the average trade estimates, further herd reduction is needed to restore profits, said analysts.

The industry is not pulling back as much as some segments would like, with the supply side wanting to see a further decline of 3-4%, according to Don Roose, president of US Commodities Inc.

A drop in the number of hogs imported from Canada following implementation of Country of Origin Labelling in the US helped reduce the US herd size. US producers and packers were reluctant to handle Canadian hogs amid concerns that consumers would shy away from pork that did not have a US label.

The last two pig reports would support a market hog figure in the 98-98.5% of a year ago, but it will be a smaller number after adjusting for Canadian hogs, said livestock analyst Bob Vande Vorde.

Breeding hog numbers usually do not fall much during the final quarter, but were likely to do so this year because of poor profits.

"My breeding estimate takes 62,000 head out of the herd from September 1 to December 1. If it were not for year-on-year reductions in Canadian-origin feeder pigs in our market hog mix, our market hog number would be fully 1% larger. Breeding herd number over the past two quarters has been reduced 24,000 head and 93,000 head, respectively," he said.