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Better hog prices seen in 2009

“Depending on where U. S. domestic pork supplies end up, hog prices should increase in the first half of 2009.”

– Brad Marceniuk, Saskatchewan Agriculture

Canada’s hog producers should see better prices in 2009 than in 2008, according to projections made by livestock specialists. A favourable price outlook for U. S. hog values and a beneficial exchange rate were seen as influences supporting the Canadian hog sector.

“Based on current lean hog futures prices and Canadian exchange rate futures, the futures market is indicating that Saskatchewan Index 100 hogs could average between $125 and $135 per hundred kilograms (ckg) during the first quarter of 2009,” said Brad Marceniuk, an economist with Saskatchewan Agriculture’s livestock development branch in Saskatoon.

Hog prices during the second quarter of 2009 were seen rising to $160 to $170 per ckg, he said.

Canadian market hog prices are expected to increase more than U. S. hog prices primarily due to the decline in the value of the Canadian dollar versus the U. S. dollar, Marceniuk said. Fluctuations over the coming months, however, could have an impact on how much the Canadian hog price moves.

An independent livestock analyst, who did not want his name used, agreed that values for hog producers in Canada will experience slightly higher prices between now and June.

Part of that, he said, can be attributed to declines in breeding sows in both the U. S. and in Canada and the resulting contraction in supply in both countries.

Mexico adds volatility

Combine lower pork production with a slight improvement in export demand, on a year-over-year basis, and there is good reason to believe values will improve as well, the analyst said.

The analyst also felt the situation between the U. S. and Mexico and Mexico’s banning of U. S. meat also was likely to keep some volatility in the hog sector.

Mexico has agreed to end its ban of U. S. meat imports from about 20 of the 30 U. S. plants it suspended on Dec. 23, said Laura Reiser, a U. S. Department of Agriculture spokeswoman. Mexico has taken steps to resume imports of meat from 20 U. S. plants after receiving corrective action plans, she said.

USDA has also received action plans from five more U. S. meat plants and will submit those to Mexican officials shortly, Reiser said.

Mexico originally suspended shipments from 30 U. S. beef, pork, lamb and poultry plants over sanitary conditions involving packaging, labelling and transportation.

Cyclical factors were also expected to help the Canadian hog sector see better values, as will ideas of improved pork demand from Canadian outlets, the analyst said.

Pork “better priced”

“I’m projecting that Canada’s pork exports will improve by two to three per cent in 2009 from 2008 levels and that domestic demand for pork products domestically will also be up, given that pork is better priced than poultry and beef at this time,” the analyst said, adding that the pork situation is looking at some pretty good support over the next six months.

Hog commodity markets in the U. S. will continue to be volatile over the coming months, reflecting changes in supply and demand estimates as U. S. slaughter numbers change, Marceniuk said.

“While we expect reductions in U. S. hog slaughter numbers during the first half of 2009, we also expect reductions in U. S. pork exports,” he said.

“Depending on where U. S. domestic pork supplies end up, hog prices should increase in the first half of 2009, particularly around the end of the second quarter and start of the third quarter.”

Total meat production in the U. S. and continuing levels of cold storage stocks will be important for meat and pork pricing in general, particularly if a global recession slows U. S. exports.

Changes in U. S. weekly hog slaughter numbers will continue to be important in determining market direction and pricing. The demand for meat will be a key factor influencing North American hog prices in 2009.

There were concerns coming from some U. S. hog analysts that the global recession could limit the upside in any U. S. hog price improvement, Marceniuk said.

Glenn Grimes and Ron Plain of the University of Missouri have estimated that commercial hog slaughter numbers in the U. S. will decline to 29.8 million head in the first quarter of 2009, which would be down 2.7 per cent from the same quarter during 2008, and drop to 26.3 million head in the second quarter, down another 5.9 per cent.

While they have estimated slaughter numbers to decline in 2009, Marceniuk said, they also anticipate U. S. pork exports to decline and U. S. pork imports to increase during the first half of 2009, which may keep domestic pork supplies similar to 2008 levels.

Grimes and Plain have estimated that U. S. hog prices in 2009 to be similar to 2008 prices, with prices peaking in the third quarter. Based on their estimates of US$73-$78 per hundredweight for the third quarter of 2009, that would equal about C$180-$192 per ckg, based on an 85-cent dollar.

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