Market Comments

October 15, 2007 — 

Hog slaughter set a new weekly record for the second consecutive week at 2.348 million head, providing further evidence that the number of hogs on the ground is well above what the latest USDA hog inventory survey indicated.

Since September 1, weekly hog slaughter has been on average 5.27% higher than the previous year. The September 1 Hog Inventory survey indicated that market hogs weighing +180 pounds were 3.4% higher than the year before while hogs weighing 120 - 179 pounds were 2.8% higher than the year before. It is likely that the USDA survey again underestimated the inventory of market hogs. Several factors could account for this such as: better performance and improved productivity from successful vaccinations, under reporting of the situation on the ground, and increased hog imports from Canada.

On this last point, the data shows that the number of Canadian hogs in the US weekly kill since September 1 is up on average 10.3% from a year ago while the number of US born hogs in the weekly kill during the same time is up an average 4.6% from last year.

Regardless of the reasons, the bottom line is that there is simply too much pork flowing in the market at this time. Pork exports may have rebounded but the current pace of production is simply overwhelming. Lean hog prices are down 10.7% while the pork cutout is down 12.8%.

Source:
The Daily Livestock Report, October 12, 2007, Steve Meyer, Paragon Economics