November 16, 2009

Rallying sow prices and slaughter data that show fewer sows are being processed than during August indicate that producers collectively have either halted or slowed significantly herd reduction.

 

A bounce in sow prices occurred at several locations across the Midwest this week. Prices for the large fleshy sows used by whole-hog sausage makers climbed into the mid to high $40s per hundred pounds live weight at some country buying points. These prices are nearly double what they were about 12 weeks ago.

 

The US Department of Agriculture's slaughter data show a weekly average of 96.6 percent of a year ago during September and October. In August, the weekly rate was nearly even with a year ago. Part of the decline in US sow slaughter this year has been due to a reduction in imports of culled breeding animals from Canada after the Canadian government offered producers there a buyout program in early 2008.

 

Some analysts and economists have said further liquidation of the US swine-breeding herd is needed in order to trim 2010 pork production levels and ensure producer profitability.

 

"Gilt and sow slaughter data indicates any reduction in the breeding herd is at a quite slow rate," said Glenn Grimes and Ron Plain, agricultural economists at the University of Missouri, in their latest weekly hog outlook report.

 

A rally in lean hog futures prices from the autumn lows have put the late spring and summer 2010 contracts at levels that should be profitable for producers. Analysts and brokers warn, however, that the rise in futures prices may not last through expiration. So unless producers lock in prices for at least a portion of their hogs and the corn and soy-meal needed to feed them, the long period of losses could be extended.

 

Some producers are being forced into bankruptcy after losing money for more than two years. Others could face the same fate by the end of the year or early 2010 since current cash prices remain below the cost of production.

 

Last week's cattle slaughter was estimated at 625,000 head, compared with 629,000 a week ago and 620,000 a year ago. Year-to-date cattle slaughter is down 4.1 percent from a year ago.

 

The week's hog slaughter estimate was 2.290 million head, compared with 2.302 million a week ago and 2.320 million a year ago. For the year, hog slaughter is off 2.9 percent.

 

The USDA estimated total beef, pork and lamb production for the week at 963.7 million pounds. Last week's output was 971.6 million pounds, and the year-ago figure was 959.4 million pounds. Year-to-date combined meat output is down 2.5 percent.

 

Broiler/fryer slaughter for the week was estimated at 159.758 million head, compared with 160.025 million a week ago and 159.887 million a year ago.