July 15, 2008


Reduction of Canada-origin swine to support US pork prices by year-end


Canadian live swine imports have been declining since April, but the number of Canada-origin hogs in the US slaughter mix is expected to remain above a year ago until early in the fourth quarter, when a decline would support US pork prices.


The number of live hogs and feeder pigs shipped from Canada in 2007 set a record at slightly over 10 million head, according to the USDA. Imports were at a fast pace during the first quarter of this year and were up 25 percent from the same period a year ago. However, by mid-year, the year-to-date total was up just 9.9 percent from last year.


If the declines seen in the second quarter continue, the year-to-date total could fall below the year-ago figure by around the end of the third quarter.


Reductions in the breeding herd in Canada due to record high feed costs and an unfavorable exchange rate have resulted in fewer pigs available to be shipped to the US.


Further cutbacks in production are expected, as a Canadian government a sow buyout programme would reduce the breeding herd by at least 10 percent.


USDA data show the biggest year-on-year declines in imports so far are in the barrow and gilt for slaughter category. These hogs went from nearly 159,000 more head than a year ago in the first quarter to about 208,000 fewer than 2007 in the second quarter. Compared to a year ago, more feeder pigs were shipped south through May. The increase in this category was larger than the decline in barrows and gilts.


In June, even the feeder pig category showed about 7,300 fewer animals were imported, compared with a year ago. Analysts said the feeder pigs imported from Canada require from five to six months to grow to slaughter size. This means pigs that were imported in April will reach slaughter weight by August or September.


Feeder pigs imported in May were above a year ago but well down from the pace set in the first quarter. It was also the first month in which the increase in feeder pigs was not big enough to offset the decline in barrows and gilts.


Analysts said the effect of feeder pig imports on slaughter can be estimated by rolling the data forward by about five months. After doing so, they projected that the portion of US slaughter that originated in Canada will dip below the year-ago figure by October or early November.


Barrow and gilt imports have been below year-ago levels for 13 consecutive weeks.


In June, USDA data showed a weekly average of about 24,400 head, down sharply from nearly 55,000 weekly during the first quarter. Feeder pig imports are also beginning to head down: in June, numbers averaged about 119,000 head, versus nearly 152,000 weekly in the first quarter.


If the recent trends continue, the number of slaughter-ready hogs with Canadian origin available to US packers could decline by about 30,000 to 35,000 head per week.


Analysts said cutbacks in imports from Canada "might knock about 1 percent off the US hog slaughter" during the final quarter, which would be supportive for prices.

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