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 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. 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. The CME Lean Hog Index is based on the 2-day average net price of slaughtered hogs at the average lean percentage level.
Prices - Lean hog futures prices (Barchart.com symbol LH) moved sideways in Q1 2013 until March when they tumbled to the low for the year at 76.80 cents a pound on weak demand after U.S. Jan pork exports slumped -15.6% y/y. Also, the outlook for increased future supplies was bearish after the Quarterly Hogs & Pigs report showed the March 1, 2013 hog winter pig crop was a record for the period. Pork supplies through the first-half of 2013 remained ample after the May Cold Storage report showed that frozen pork supplies as of Apr 30 were up +5.9% y/y at a record 698.8 million pounds. Hog prices recovered and moved higher in Q2 of 2013 and in July posted a 1-year high as record-high beef prices bolstered consumer demand for cheaper pork supplies as seen by the surge in wholesale sale pork prices in July to $1.1133 a pound, the highest since USDA data began in 1997. Hog prices fell back the second-half of 2013 on expectations for increased supplies as the USDA forecast that U.S. 2014 pork output will climb +2.9% to a record 23.92 billion pounds. Also, foreign demand remained slack after U.S. 2013 pork exports fell -7.2% y/y to 4.992 billion pounds. Lean hog prices ended 2013 little changed, down -0.3% at 85.425 cents a pound.
Supply - World pork production in 2013 rose +1.8% to 107.514 million metric tons. The USDA is forecasting a rise of +1.3% to 108.924 million metric tons in 2014. The world's largest pork producers are China with 59% of world production in 2013, the European Union with 18%, and the U.S. with 8%. U.S. pork production in 2013 fell -0.4% to 10.508 million metric tons. The USDA is forecasting that U.S. pork production in 2014 will rise by +2.6% to 10.785 million metric tons. The number of hogs and pigs on U.S. farms in 2014 (Dec 1) rose by +2.1% to 67.775 million, well below more than 6-decade high of 68.117 in 2007. The federally-inspected hog slaughter in the U.S. in 2013 fell -1.0% to 111.247 million head, down from the 2008 record high of 115.421 million head.
Demand - World consumption of pork in 2013 rose by +2.0% to 107.242 million metric tons. The USDA is forecasting an increase of +1.3% in 2014 to 108.671 million metric tons. U.S. consumption of pork in 2013 rose by +2.1% to 8.616 million metric tons. The USDA is forecasting a +2.0% increase in U.S. pork consumption in 2014 to 8.785 million metric tons.
Trade - World pork exports in 2013 fell -2.7% to 7.058 million metric tons. The USDA is forecasting that world pork exports in 2014 will increase by +2.6% to 7.243 million metric tons. The world's largest pork exporters are the U.S. with 32% of world exports in 2012, the European Union with 31%, Canada with 18%, and Brazil with 9%. U.S. pork exports in 2013 fell by -6.1% to 2.292 million metric tons and the USDA is forecasting a rise of +4.3% in 2014 to 2.390 million metric tons.
World pork imports in 2013 fell -1.6% to 6.810 million metric tons. The USDA is forecasting that world pork imports will rise by +1.5% to 6.913 million metric tons in 2014. The world's largest pork importers are Japan, which accounted for 18% of world imports in 2013, Russia (13%), Mexico (12%), and China (11%).
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