US hog supply to tighten beginning 2009

According to livestock analysts, USDA's quarterly Hogs and Pigs report indicated US hog producers continue to reduce their breeding herds, which could mean moderation in hog slaughter by December and into 2009. However, between now and then, slaughter could tax capacity.

Livestock analysts Steve Meyer and Len Steiner in the CME Group's Daily Livestock Report said a 2-percent drop in sow farrowing as indicated by the USDA represents a reasonable yet not robust liquidation rate for the US sow herd.

Along with continued declines in Canadian hog imports, December slaughter should be below last year's very large volumes.

They noted, however, that an increase in hogs weighing 120-179 lbs (6 percent more than a year ago) means higher on-year slaughter will continue through late November, as those hogs go to market.

Stevens Inc. warned in a note to investors that this large number could raise concerns that hog supplies could exceed US slaughter capacity at some point this fall.

Wachovia livestock analyst Jonathan Feeney saw USDA's report as positive for hog prices next year.

In a note to investors, Feeney said the report generally point to better hog fundamentals in 2009. Current hog and corn prices indicated producers are losing about US$5.00 per hundredweight, but Feeney projected they could be earning about US$5.00 per hundredweight by April, 2009.