Theoretical Four Year Hog Cycle Source: Hog Market Cycles, http://ndsuext.nodak.edu/extpubs/ansci/swine/ec1101w.htm The Big Hog Cycle What goes down, must go up? John Bancroft OMAF Grower-Finisher Specialist john.bancroft@omaf.gov.on.ca 519-482-3133 June 17, 2003, Stratford, ON Genetics for Swine Production, What s in it for the producer? Cycle Length Varies Corn prices and the resulting impact on feed prices Supply, demand and prices of competing meats (i.e. beef and chicken) Pork wholesale and retail prices along with the farmer s share of the retail price Domestic and export demand for pork Production efficiency (i.e. % of sows farrowing, pigs per sow, dressed weights of market pigs) Cycle Length Varies Production technologies Changing consumer attitudes & income Impact of unexpected events (i.e. disease out breaks, political decisions) Industry demographics Global competition Sows Breeding / Gestation Processors Market Hog 105 to 125 kgs Pig Cycle 115 days 7 days Grow-Finish 11 to 16 wks Sows Farrow 14 to 28 days Nursery 4 to 7 wks Feeder Pig 25 to 30 kgs Lifecycle of a Hog Cycle John Lawrence, Iowa State http://www.econ.iastate.edu/faculty/lawrence/hogs.htm After about a year of profits, breeding herd inventory begins to increase on a yearover-year comparison Eventually resulting in an increased slaughter level After about a year of losses, breeding herd slaughter increases on a year-over-year comparison which decreases the breeding herd Eventually resulting in a decreased slaughter level
U.S. Breeding Herd Liquidations Year Month # of Quarters Cycle 1983 Dec. 13 1984 to 1987 1988 Dec. 9 1988 to 1991 1992 Dec. 4 1992 to 1993 1994 Dec. 10 1994 to 1997 1998 Dec. 8 1998 to 2001 2002 Sept.? 2002 to? 7,800 7,600 7,400 7,200 7,000 6,800 6,600 6,400 6,200 6,000 5,800 U.S. Quarterly Breeding Herd (1,000 of Hd) 94 to 97 98 to 01 02 to? 28,000 U.S. Quarterly Commercial Hog Slaughter (1,000 of Hd) 94 to 97 98 to 2001 2002 to? U.S. Quarterly Pork Production (millions of pounds) 5,400 5,200 27,000 26,000 5,000 25,000 4,800 24,000 4,600 23,000 4,400 22,000 4,200 21,000 4,000 Percent of Sow Inventory Farrowing moved from the 42% range to the 46% range Pig Crop - pigs per sow moved from just below 8 pigs/sow to about 8.8 pigs/sow Dressed market weights moved from the mid 180 s to the mid 190 s plus (pounds) 21,000 20,000 19,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 U.S. Pork Production (millions of pounds) 1.5% Average Yearly Growth 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02
Pork Production & Profitability from Steve R. Meyer s presentation at Ontario Pork Annual Meeting March 2003 In those years after 1964 when pork production was below the 1.5% trend, Iowa hog producers averaged a profit of $16.48 per hog sold. In those years after 1964 when pork production was above the 1.5% trend, Iowa hog producers averaged a net loss of $0.22 per hog sold. Production, Inventory, Price Graphs Production is the quarterly pork production in billions of pounds read from the left-hand axis Inventory is the quarterly pig inventory in millions of head read from the left-hand axis Price is US$ per cwt. (dressed basis) from the various prices series that Ontario has used over the years for formulas 70 U.S. Quarterly Pork Production, Inventory & Price - 1994 to 1997 Production Inventory Price $90 70 U.S. Quarterly Pork Production, Inventory & Price - 1998 to 2001 Inventory Production Price $90 65 65 60 55 50 $30 millions of head 60 55 50 $30 $/cwt. 45 $20 $10 45 $20 $10 40 $0 40 $0 Technology changes 3 site production, phase feeding, Contract production and marketing vertical integration and/or coordination Information Technology records, production, health, marketing Specialization production, labour, marketing, pig movement U.S. became a net exporter of pork consistent growth of exports U.S. Pork Retail Price (US$/pound) $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 $1.50 $1.25 $1.00 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
U.S. Quarterly Pork Retail Prices (US$/pound) % Farm Share of U.S. Pork Retail Price $2.80 94 to 97 98 to 2001 2002 to? 55% $2.70 50% $2.60 45% $2.50 40% $2.40 35% 30% $2.30 25% $2.20 20% $2.10 15% $2.00 10% Net Farm Share of the U.S. Pork Retail Price (US$/pound) U.S. Pork Cutout Value (US$/cwt.) $1.10 $1.00 $75 $0.90 $0.80 $65 $0.70 $55 $0.60 $0.50 $45 $0.40 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 U.S. Quarterly Pork Production, Inventory & Price - 2002 to? Animal Disease Problems Foot & Mouth Disease Taiwan, Europe,Korea BSE in Japan Consumer Preferences & Disposable Income convenient, service, entertainment value Competing meats i.e. beef, chicken 70 65 60 55 50 45 Inventory Production Price $90 $30 $20 $10 40 $0
2002 and Beyond Inventory & Productivity Trade Issues COOL, Currency Value, Russian Trade Quotas Competing Meats Consumer Preferences and Disposal Income changing demographics, health, knowledge Foreign Animal Diseases Food Safety/Traceability Global Competition % Change from Previous Year 40% slaughter price inventory 30% 20% 10% 0% -10% -20% -30% -40% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 What happened in Ontario? Ontario Market Hog Quarterly Average Price ($/ckg, 100 index) $200 $190 Ontario Average Yearly Market Hog Prices ($/ckg, 100 index) $225 $215 $205 $195 $180 $185 $175 $170 $165 $155 $160 $145 $135 $150 $125 $115 $140 $130 $105 $95 $85 $120 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 $75 $0.90 Monthly Average Canadian $ Value versus One U.S. $ (1990 to 2003) Canadian Dollar Value $0.76 $0.74 $0.85 $0.72 $0.80 $0.70 $0.75 $0.68 $0.70 $0.66 $0.64 $0.65 $0.62 $0.60 90 91 92 93 94 95 96 97 98 99 00 01 02 03 Data Source: Noon Hour Rate, Bank of Canada, http://www.bankofcanada.ca/en/exchange.htm $0.60
Ontario Corn Price ($/tonne, farm pickup) $280 $260 $240 $220 $200 $180 $160 $140 $120 $100 Prime Interest Rate 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% $175 $170 $165 Actual & Futures Based Projected Monthly Ontario Prices for 2003 Projected Yearly Average - $145 Friday, June 13, 2003 $160 $155 $150 ($/ckg, 100 index) $145 $140 $135 $130 $125 $120 $115 $110 $105 $100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 $152 $167 $157 $137 $136 $143 $159 $156 $112 $130 $121 $127 2003 $130 $140 $137 $135 $147 $160 $168 $164 $153 $141 $132 $127