U.S. sow slaughter hits eight-month high amid drought

The number of sows slaughtered last week rose to the highest level in eight months, U.S. government data showed on Thursday, underscoring farmers’ rush to liquidate their herds due to rising feed costs caused by the worst drought in 56 years.

The rush to slaughter could bode well for consumers in the short-run as a pick-up in supplies pressures pork prices at the grocery store and restaurant levels, but prices could rise by mid-2012 as hog supplies tighten, analysts said.

Prices for sows, which are typically retained by farmers for breeding, have been tumbling as the slaughter rate rises.

U.S. Department of Agriculture data showed the price of sows falling 33 per cent last week to $42.66 per hundredweight (cwt) from the year’s high of $63.67 in early March and off 36 per cent from a year ago’s price of $67 (all prices US$).

The drought has devastated the corn and soybean crops, vital feed ingredients for the livestock and poultry industries, causing corn prices at the Chicago Board of Trade to rally nearly 60 per cent to a record high $8.29-3/4 on Thursday.

"Slaughter at the highest of the year, paired with the drop in sow prices suggest sow slaughterers are having trouble finding shackle space for all the sows being offered," said independent market analyst Bob Brown at Edmond, Okla.

USDA’s weekly slaughter data for the week ended July 28 showed sow slaughter at about 61,400 head, up 5.4 per cent from a year ago and the highest since the week of Dec. 10, 2011, when 67,700 were slaughtered.

"Recent increases in weekly sow slaughter are in response to increasing break-evens and further significant declines in producer profitability brought about by increasing corn and soybean meal prices," said Erica Rosa-Sanko, analyst with the Livestock Marketing Information Center in Denver.

Rosa-Sanko said reducing the sow herd was one way hog producers were responding to large losses that are forecast for the remainder of this year into 2013.

Further reductions in the sow herd will be reflected in a smaller hog slaughter numbers next summer and fall, she said.

Pork packing companies were losing $1.20 per head of hog they were processing on Thursday, compared with a profit of $6.11 a week ago and a profit of $1.05 a day ago, according to Colorado-based analytics firm HedgersEdge.com.

— Theopolis Waters writes for Reuters in the Chicago area.

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