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Signs of Sow Herd Liquidation

Published on: 16:07PM Jun 12, 2009
The chart of the week is weekly sow slaughter. A sow is a female pig that has produced a litter of piglets. The weekly sow slaughter numbers can give the trade an indication of a building or contracting hog herd. It works like this: When farmers want to reduce the size of the herd, they liquidate a portion of their breeding inventory (sows) as well as send more gilts (female pigs that haven’t produced a litter yet) to slaughter instead of retaining them to produce. The net effects from these actions are that less piglets are born and pork output can be reduced. This is all in an effort to influence hog prices higher. Since it is well documented that hog farmer margins are historically poor (and have begun to organize a subsidized sow buyout program), there are expectations that the U.S. hog herd could be reduced further in the coming months. The initial indications of that would likely be an uptick in sow slaughter and a decline in sow prices. Sow prices did fall this week, to their lowest levels in recent months. The latest sow slaughter data available (Memorial Day week), however, was still notably less (8%) than the prior five-year average. With feed prices high and hog prices depressed, it’s almost a certainty that sow slaughter will pick up soon if it hasn’t already. And that could be bullish for hog and pork prices down the road.
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