October 6, 2003

Larger US Hog Slaughter Seen in Year 2004 
                                                        
US Hogs and pigs for the September 1 point to the possibility of larger hog slaughter in year 2004 than in year 2003. September to November farrowing intentions are for only a 1% reduction from last year and December to February farrowing intentions call for the same as a year earlier.

A 1 % larger litter size for these 2 quarters will give a slightly larger US production for slaughter in the 1st half of 2004.

Current sow and gilt slaughter data suggests that the potential for some growth in the US sow herd. Sow slaughter from domestic sources for the 1st 3 weeks ending in September was down above 19%.

Total US sow slaughter including imports of sows from Canada for these 3 weeks was up 0.3% from last year; however, cull sow and boar imports from Canada during the last 3 weeks ending in September were up 104% from last year.

Gilt slaughter for the 1st 4 weeks ending in September was down 1.5% from the same weeks in 2002. Granted we were reducing the breeding herd at this time last year but these data suggest we may have grown the herd a little during this period this year.

Current estimate of live price for 51-51% lean hogs US basis for the 4th quarter of 2003 is $36-39 per cwt.

Estimate for all of year 2004 for a live price US basis 51-52% lean hogs is $38-41. For comparison, a $39-41 is estimated for year 2003.  
 

The current futures market prices for the 1st 8 months of 2004 may be providing some incentive to at least level the size of the breeding herd. For the 1st 6 contracts in 2004 the closing prices on Thursday showed a futures price of almost $61 per cwt carcass weight. This would be about $45 per cwt live without considering a producers' basis.

The bearish farrowing intentions in the September hogs and pigs and the stressed hog price of this week are expected to convince hog producers to continue to reduce the US breeding herd through the next several months.

Certainly, what happens to pork production in Canada is also important as to our pork supplies in 2004. We are also hoping the Canadian industry will realize it is not to their best interest to continue to grow faster in production than growth in demand.

Slaughter this week under Federal Inspection was estimated at 2049 thousand head --- up 3.1% from a year ago and the 1st week with slaughter larger than last year for 6 weeks.

Slaughter for the 4th quarter of this year is expected to be within about 1% of last year, on the low side. If we continue to get the increase in slaughter hog imports from Canada as the rate of the 3rd quarter, our slaughter will likely be a little larger in October-December this year than in year 2002.

Cash hog prices continued under pressure this week. Live top prices at terminal markets this Friday were from $1.50 to 4.50 lower than 7 days earlier. These top prices for select markets this Friday morning were: Peoria $35.50, St. Paul $37, Sioux Falls $37 and interior Missouri $36.25.

Average prices for 185 pound carcass with 0.9-1.1 inch back fat, 6 sq. inch loin 2 inches deep by region were: western Cornbelt $52.45, eastern Cornbelt 52.46, Iowa and Minnesota $52.57, and Nation $52.43.

Cash feeder pig prices at United Producers Tel-a-auction this week were up to $20 per cwt above 2 weeks earlier. These prices at United by weight groups were: 40-50 pounds no test, 50-60 pounds $70-$87.50, 60-70 pounds $68.00, 70-80 pounds $76 per cwt.