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N American pig herds need to shrink more

More decreases in the total hog herd in both the US and Canada are expected before the industry on the North American continent may turn profitable again.

University of Missouri economist Ron Plain estimates Canada's total pig herd fell 6-7% during the last quarter of 2009, as the last episode of a five-year-long trend.


Pork producers' losses on both sides of the border have swollen in recent years as feed costs soared and a weak economy hurt meat demand. US producers lost a total of $6 billion raising hogs the past two years, Plain said. More herd contraction is needed before the industry becomes profitable again, he said.


Fewer hogs
"We need to stop the red ink and start turning profits, and the key to that is fewer hogs," Plain said. "We need to keep cutting herds."


Canada's pork producers have been contracting for a longer time and, more recently, at a faster pace, than their US counterparts. The Canadian breeding herd has been declining since March 2005, while the US herd has been shrinking since October 2007, analysts Steve Meyer and Len Steiner reported this week.


As of October 1, Canada's breeding herd amounted to 1.353 million head, down 4.3% from 1.417 million on October 1, 2008, according to USDA data. The US breeding herd as of December 1 was 5.874 million head, down 3.1%.


"We need to be reducing herds all the way through 2010, but I worry that may not be the case,” Plain said.


Combined herd sizes
The combined US and Canadian breeding herds have declined 7.1% from an October 2007 peak of 7.752 million head, Meyer and Steiner said. Still, that's 'not a large enough dent to push hog prices to consistently profitable levels', given a 20-30% increase in costs, Meyer and Steiner said.


The size of the breeding herd is a key indicator of pork supplies six to 18 months in the future.


Related websites:
• US Department of Agriculture
• University of Missouri

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