Last week Statistics Canada released its estimates of the October 1 Canadian pig inventory. At the same time, USDA and Statistics Canada released a joint report estimating the combined inventories using the September 1, 2008 USDA estimates for US inventories.
The combined Canadian and US breeding herd is now estimated at 7.663 million head, 97% of the estimate 1 year ago. This is the first time the breeding herd has declined for 2 quarters versus the year previous since the summer and fall estimates from 2003.
The kept for market category is estimated to be 72.556 million pigs, 100% of 1 year ago. This is the first quarterly report that did not show an increase over 1 year ago since the fall of 2005.
The estimates for both the breeding herd and the kept for market inventory suggest that we will continue to have a plentiful supply of pigs in coming months. While the Canadian breeding herd is down just over 6% from 1 year ago, the US inventory on September 1 was down only 1.6%. In the past months, I have been at sites or seen pictures of on-going construction for over 13,000 new sow spaces in the US. All of this suggests that the majority of the reduction in North American inventory will continue to occur in Canada.
The obvious question – will Canadian’s sell off sows fast enough and deep enough to make a difference in our market numbers? In part, the answer will depend on how COOL is implemented in the coming months. In the western cornbelt, we continue to import large numbers of Canadian born feeder pigs. Except for the week of July 4, 2008, we have imported over 100,000 Canadian weaned and feeder pigs every week since January 1, 2007. Over this almost 2 year period we have averaged over 128,000 imported pigs per week into US production facilities.
If the number of Canadian pigs into US facilities declines, I would expect the demand for US born pigs to replace these pigs will increase. Fixed costs for wean-finish facilities are large, and the demand for the manure from a production facility now adds almost $20 per pig space to the value of the facility. This suggests that US producers are not facing the same economic decision as their Canadian counterparts. It appears to me that US producers will continue to be slow on selling off the breeding herd in response to low prices, with the Canadians continuing to loose inventory more rapidly.