In the past few weeks, I’ve been asked repeatedly for my thoughts on the profitability of the US swine industry in 2009. The reason for the question is the large amount of uncertainty in the outlook for the many variables that are part of the profitability equation.
On the supply side, the USDA will release its December 1 estimates of the US inventory next week. This will be followed by Canada’s January 1 estimate released in late January. While everyone expects the Canadian breeding herd to show continued reductions in numbers, the reductions in the US breeding herd are less clear. At the same time, all of you are experiencing tremendous increases in productivity, both from your female inventory and in your grow-finish facilities.
It is now reasonable to have targets of 1.5% death loss in nursery and 1.5% death loss in grow-finish facilities, something unheard of just last year. Many of you now target 93%+ of the pigs weaned as ‘prime’ pigs, that is, pigs that end up going to the slaughter house versus death loss or a cull buyer. Conversations with a cull buyer in the past week confirm that many are actually looking for cull pigs to fill orders, something unheard of just 1 year ago.
At the same time, daily gains in grow-finish are routinely approaching 1.9 lb/d in closeouts with feed conversions of 2.6 or less on meal diets and only small amounts of added fat.
In breeding herds, the standard for years for doing cash flow estimates, etc. was 20 pigs per inventoried female. Many of you are routinely hitting 24 pigs, with the best approaching 27.
These improvements in breeding herd performance suggest to me that we haven’t reduced the North American female inventory sufficiently. We will continue to have large volumes of pigs going to slaughter in the US in 2009. While peak daily slaughter numbers may not hover at 420,000 per day like they did this fall, they could easily hover at 380,000+ head weekly, which is still a very large number of pigs.
The impact of COOL on production numbers is still unclear. I have had reports of finishing facilities coming up empty as pig owners decide not to refill with their usual Canadian source. On the other hand, there is limited evidence that the flow of Canadian weaned and feeder pigs is rapidly slowing in anticipation of an April 1 deadline of some packers. For the week ending December 13, we imported 107,674 pigs weighing less than 110 lbs. For the week ending December 19, the USDA feeder pig price report (http://www.ams.usda.gov/mnreports/NW_LS255.txt) listed 50,000 pigs as coming from Canadian sources, out of a total report of 129,860 pigs. This suggests that Canadian born feeder pigs will remain important to US finishers.
What about export markets? I think all of us recognize the importance of this market to our financial success. So far, even in the face of a strengthening dollar the world seems to prefer our product – great news for all of the hard efforts we all put into assuring the world of the high emphasis we place on food safety in our production systems. As the Canadian dollar falls, we can expect increased competition from them in world trade.
However, I don’t look for increased competition from European sources such as Denmark. Producers are struggling with increased environmental regulation, limits on GMO feed ingredients that are driving up feed costs, and a host of other challenges that will limit their ability to compete with North American sources.