Hogs

Hogs are generally bred twice a year in a continuous cycle designed to provide a steady flow of production. The gestation period for hogs is 3-1/2 months and the average litter size is 9-10 pigs. The pigs are weaned at 3-4 weeks of age. The pigs are then fed so as to maximize weight gain. The feed consists primarily of grains such as corn, barley, milo, oats, and wheat. Protein is added from oilseed meals. Hogs typically gain 3.1 pounds per pound of feed. The time from birth to slaughter is typically 6 months. Hogs are ready for slaughter at about 254 pounds, producing a dressed carcass weight of around 190 pounds and an average 88.6 pounds of lean meat. The lean meat consists of 21% ham, 20% loin, 14% belly, 3% spareribs, 7% Boston butt roast and blade steaks, and 10% picnic, with the remaining 25% going into jowl, lean trim, fat, miscellaneous cuts, and trimmings (USDA). Futures on lean hogs are traded at the Chicago Mercantile Exchange. The futures contract is settled in cash based on the CME Lean Hog Index price, meaning that no physical delivery of hogs occurs.

Prices – Lean hog prices on the weekly nearest futures chart moved sideways in the first quarter of 2003 in the narrow range of about 48-55 cents/pound. Hog prices then rallied sharply in the April-June period to post a 2-year high of 68.20 cents in mid-June. Prices then trended lower through the rest of the year and closed the year at 55.42 cents. That close was very close to the average price of 55 cents seen over the past 3 years.

The decline in hog prices in the latter half of the year was due mainly to higher than expected hog counts and slaughter rates, which put downward pressure on cash pork prices. Furthermore, hogs coming to market were several pounds heavier on average than in the previous year. Downward pressure on hog prices also stemmed from a sharp increase in the number of feeder pigs and market hogs being imported from Canada (7 million in 2003, up 1.25 million from 2002, USDA). Offsetting the bearish supply situation was an increase in US consumer demand for pork, boosted in the latter half of 2003 by some switching away from beef. The switch from beef to pork was due to high beef prices into November and then by beef safety concerns after US mad cow scare hit in late December.

Supply – World production of pork in 2003 totaled 87.204 million metric tons, according to the USDA, up by 1.4% from 86.030 million tons in 2002. The USDA is forecasting a continued rise in production to 88.303 million tons in 2004. The US in 2003 produced 8.931 million metric tons of pork, up slightly from 8.929 million tons in 2002. US pork production in 2003 accounted for about 10% of world production. China was the world’s largest pork producer in 2003 at 44.100 million metric tons, followed by the European Union at 17.850 million tons, and then the US.

Demand – World consumption of pork in 2003 totaled 86.732 million metric tons, up from 85.639 million in 2002. China is the largest consumer of pork at 43.856 million tons, followed by the European Union at 16.940 million tons, and the US at 8.733 million tons. The US accounts for about 10% of world pork consumption.

Trade – World pork exports in 2003 reached a record 4.061 million metric tons, up 1.3% from 4.008 million tons in 2002. The largest exporters of pork in 2003 were the European Union (1.000 million tons), Canada (975,000 tons), the US (762,000 tons), and Brazil (620,000 tons). The largest export markets for US pork products in 2003 were Japan (accounting for 49% of US exports), Mexico (accounting for 19% of US exports), and Canada (accounting for 11% of US exports). World imports in 2003 fell 4.3% to 3.591 million tons from 3.752 million tons in 2002 and a continued slight decline to 3.584 million is expected in 2004. The world’s largest importers of pork in 2003 were Japan (1.150 million tons), Russia (600,000 tons), the US (567,000 tons), and Mexico (335,000 tons).