Watch your inbox Monday for our Hogs and Pigs Report Review. The report will be released at 2 p.m. CDT on Friday and promises to be one of the most watched and analyzed USDA reports in quite some time. USDA obviously missed the Dec. 1 market hog inventories badly, and it will be interesting to see how they have adjusted to account for the impact of circovirus vaccines, potentially higher productivity, etc.
Of particular note will be whether any of the 2007 breeding herd estimates are revised. Some analysts believe that circovirus vaccines alone cannot explain the increase of market hog supplies and, therefore, that past sow herds must have been underestimated. I can understand that feeling, but I’m not in that camp completely. My take from many conversations over the past year is that the vaccines were indeed that effective, and that the slow erosion of pig survival and performance that took place over the past 3-4 years got reversed in a big hurry.
With that said, the magnitude of the numbers over the past six months has been astounding. It now appears that we will slaughter just fewer than 29.3 million head under federal inspection in the first quarter of 2008 alone. That will be far and away the largest first quarter slaughter total, and will not be far behind last fall’s record total of 30.094 million head.
Calculating Canadian Imports
Analysts have long relied on two sources of data regarding livestock imports from Canada. One is the monthly import data published by USDA’s Economic Research Service, based on data generated by the Department of Commerce’s U.S. Customs Service. These data are believed to be accurate but they take over a month to get published. January 2008 data were published in mid-March, for instance.
The other shortcoming in the monthly data is that it contains no breakouts of the type of animals being imported if they weigh over 50 kg. or 110 lb. The “feeder pig” weights (i.e. under 110 lb.) are broken into three groups: under 7 kg. (15.4 lb.), 7 to 23 kg. (15.4 to 50.6 lb.) and 23 to 50 kg. (50.6 lb. to 110 lb.). But everything that weighs over 110 lb. is lumped together in just one category.
The monthly data series is useful to document history and has served as the basis of much of our monitoring system for imports and exports. Annual totals for pig imports from Canada (simply the sum of the monthly data each year) appear in Figure 1, and clearly show that imports of feeder pigs and heavier hogs both set records in 2007 with 6.72 million feeder pigs and 3.28 million market hogs coming to the United States.
But data that are six weeks old when they are published are not terribly useful for monitoring current market conditions or animal flows, especially when economic forces are causing some major adjustments in either the Canadian or U.S. sectors. Weekly data published by USDA’s Agricultural Marketing Service have long been relied upon for this more “up-to-the-minute” analysis. USDA veterinarians that inspect documents and animals at the border generate this data. I think these people do a good job of inspection, but providing accurate data is not a big part of their job description and, as it turns out, the data they provided may not have been very accurate.
On Thursday, USDA released revised weekly import data for 2007 and year-to-date 2008. It is based on the same papers and reports that were used to generate the original data, but instead of visually classifying the animals, the market animals are classified according to their destination. That is, a load headed for Newburn, TN, (the location of the Jimmy Dean sow slaughter plant) is classified as cull sows. A load headed for Worthington, MN, (the location of a JBS-Swift butcher hog plant) is classified as market hogs.
The different approach resulted in some major changes, which are shown in Figure 2. The numbers of market hogs were generally decreased in each month, while the number of cull sows and boars was increased pretty dramatically in virtually every month.
The table in Figure 3 shows the comparisons of the old and revised data for 2007. There wasn’t much problem with feeder pigs as they were clearly smaller than the other animals. In addition, the totals for both series are quite close. But the numbers for market hogs and cull sows and boars are sharply different. And that difference is possibly important.
Many analysts (including me) have wondered for some time how we could see so few Canadian cull-breeding animals coming south, and yet hear of massive liquidation in Canada. The old data say that cull sow and boar imports are only 8.4% higher year-to-date in 2008. The new data say that number is 13.3%. The new data tell us that nearly 49,000 more sows and boars (an average of over 4,400/week) have been shipped to the United States since Jan. 1. That number represents 3% of the Jan. 1 Canadian breeding herd! The difference is important indeed.
How accurate are the new data? We don’t know yet and only time will tell. But here is one encouraging measure. The old import data and Canadian sow slaughter implied an annual cull slaughter rate of only 35% in Canada in 2007. That is very low when compared to U.S. slaughter of U.S. sows that amounted to 47.6% of the December breeding herd inventory. The new Canadian import data imply a Canadian cull slaughter rate of just over 50% -- much more reasonable. The inclusion of boars confounds these data a bit, but it appears to me that the new data are very likely an improvement. Let’s hope they remain so.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.