U.S. hog supply should start to tighten into 2009

By Janie Gabbett on 9/29/2008 of MeatingPlace.com

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

USDA reported Friday that sow farrowings were down 2 percent in the June-August period, representing "a reasonable yet not robust liquidation rate for the U.S. sow herd," according to livestock analysts Steve Meyer and Len Steiner in the CME Group's Daily Livestock Report. That, along with continued declines in Canadian market hog imports, should put December slaughter below last year's very large volumes.

They noted, however, that an increase in hogs weighing 120-179 lbs on Sept. 1 (at 106 percent of a year ago) means higher year-on-year slaughter will continue through late November, as those hogs go to market.

This large number could raise concerns that hog supplies could exceed U.S. slaughter capacity at some point this fall, warned Stephens Inc. in a note to investors.

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

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