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Hogs
U.S. hog prices, basis nearest Chicago futures, trended lower during the first half of 2002, but the decline quicken in mid-summer with prices falling to 30 cents/lb, the lowest level since the late 1990's. Prices then recovered, closing the year around 50 cents/lb, marginally higher than a year earlier, but for the year the late recovery fell far short of the 70 cent level seen at times in both 2000 and 2001. The price outlook for 2003 is more positive, partly reflecting a stronger economy, a small drop in hog supplies and moderate gain in pork exports.
The world's hog inventory in 2002 likely topped a record large 800 million head and expected to increase further in 2003. World pork production in 2002 of a record large 85.5 million metric tons compares with 83.2 million in 2001 and forecasts of almost 87 million tons in 2003. Record world consumption of 85 million tons in 2002 compares with 83 million in 2001 and estimates of 86.6 million in 2003. China is the world's largest hog producer with more than half the total and the U.S. a distant second. Germany's hog inventory, the largest in the European Union, exceeds 26 million head. The protracted slide in Russia's and the Ukraine's hog inventory has apparently bottomed at around 25 million head, however, the total still pales against the early 1990's inventory of over 50 million head.
The December 1, 2002 U.S. inventory of 58.9 million head was marginally under a year earlier. Of the total, 6 million head were kept for breeding vs. 6.2 million in 2001 and the balance to be marketed. Farrowing during the December'02-February '03 period of 2.80 million head compare with 2.84 million in the like 2001/02 period which ultimately will represent about 46% of the breeding herd. Although the U.S. hog inventory is less than 10% of the world total, slaughter and pork production are somewhat higher. U.S. per capita pork use in 2002 of 51.3 pounds compares with 50.2 pounds in 2001 and a forecast of 50.1 pounds in 2003.
More than half the inventory share of U.S. hog marketing's now come from contract hog operations, which totaled 75,350 during 2002, down 7% from 2001. Significantly, places with 2000 or more hogs on hand accounted for 10% of the operations and for the first time 75% of the inventory. In a contractual agreement, the contractor provides the hogs, feed, medication and supplies while the contractee provides the housing, utilities and labor. Most hog production still occurs in Corn Belt states, but Southern states have seen a dramatic growth in contractual operations in recent years. Still, most U.S. producers continue to raise hogs in farrow-to-finish operations. As of late 2002 the total number of hogs under contract, owned by operations with over 5,000 head inventory, but raised by contractees, accounted for 33% of the total U.S. inventory, unchanged from 2001.
Commercial U.S. hog slaughter in 2002 of 100.3 million head compares with 98 million in 2001 with an average dressed weight of about 197 pounds in both years. Pork production in 2002 of 19.7 billion pounds compares with 19.1 billion in 2001. Based upon the Fall 20021 hog inventory and breeding intentions, pork production in 2003 is forecast at 19.4 billion pounds.
The U.S. is among world's largest pork exporters: about 1.6 billion pounds in 2002 (709,000 metric tons) vs. 1.56 billion pounds in 2001 and forecast of 1.65 billion in 2003. Japan, Russia, Canada and Mexico are generally the largest importers of U.S. pork. The U.S. imports pork products, mostly from Canada and Denmark, the total of which is generally less than one billion pounds. The U.S. also imports live hogs from Canada. Collectively, the European Union is the largest importer and exporter of pork, with the bias towards exports. Canada exported 800,000 tons of pork in 2002, nearly twice as much as exports in the late 1990's, and a rise to 815,000 tons is forecast for 2003. Brazil's pork exports are also on the increase: 400,000 tons in 2002 vs. only about 100,000 a few years earlier with 430,000 tons forecast for 2003.
Midwest wholesale barrow and gilt hog prices during 2002 averaged about $34.71 per cwt vs. $45.81 in 2001 and forecast at $35-38 in 2003.
Futures Markets
Lean Hog futures and options are traded on the Chicago Mercantile Exchange (CME) where futures settle to the CME Lean Hog Index (TM). Their proprietary index tracks the value of lean pork at select U.S. packing plants. Live hog futures are also traded on the Agricultural Futures Markets (AFM) in the Netherlands.
Excerpted from the CRB Commodity Yearbook. For more information on CRB products click here
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