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Hog market update

A snapshot of Alberta hog inventory numbers, prices, hog to feed ratios, slaughter volume, exports and the U.S. market.

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See event listings and more articles in this edition of Agri-News: March 20, 2023 issue

“Alberta hog prices were higher in 2022 than in 2021, but year-to-date, average hog prices are lower than the average price for the same period in 2022,” says Ann Boyda, provincial livestock market analyst with the Alberta government. “Year-to-date (January to March 10, 2023) average hog price was $1.81/kilogram (kg), 6% lower than the average price for the same period in 2022. The average price in 2022 was $2.27/kg, which was 10.7% higher than average price for 2021 and 28.7% higher than the 5-year average.”

The average price spread between Ontario hog price and Alberta hog price was 36 cents/kg. In 2022, the price spread narrowed to 29 cents/kg. Year-to-date (January to March 10, 2023) is at 33 cents/kg. The narrower pricing spread between Ontario and Alberta may be attributed to changes in the OlyWest 2021 contract to accommodate for a portion of cutout pricing and transportation.

“Feed costs represent 65 to 75% of the variable costs of swine production,” says Boyda. “As a result, feed costs play a major role in determining the profitability of a swine operation.”

The hog feed ratio expresses the number of bushels of number 1 feed barley that are equal in value to 100 pounds of Index 100 Live Hog. The ratio is an indicator of profitability of feeding hogs – the higher the ratio the higher the price of hogs as compared to feed costs. According to Agriculture and Agri-Food Canada (AAFC), the 10-year average hog to barley ratio for Alberta is 15.3 while the average hog to corn ratio for Ontario is 16.9, which suggests a competitive advantage in Ontario over that period.

Chart 1. Hog Feed Ratio (Alberta)

Hog Feed Ratio (Alberta) (Bushels Barley equal to Value of 100 Pounds Hog) bar graph
Source: AAFC, Red Meat Section

On February 28, 2023, Statistics Canada released the hogs on farm numbers as of January 1, 2023. Total hog inventory for Alberta was 1.53 million head, down 2.5% as compared to January 2022. The breeding stock inventory decreased by 3% to 134,800 head over the same period. The largest decrease of 7.7% was reported in the 54 to 80 kilogram weight category. Boyda points out that declining hog inventories reflect the recent year’s higher production costs and volatile margins.

In terms of slaughter, for the week ending March 4, 2023, slaughter at federally inspected plants in Western Canada was 184,406 head, down 2% from the same week last year. Year-to-date slaughter volume for Western Canada was 1,644,938 head, up 6.2% from the same period last year. Nationally, slaughter volume year-to-date was 3,736,084 head, down 0.1% from the same period last year.

Alberta federal and provincial slaughter is reported to be 394,091 head for the period January to March 4, 2023. This volume is comparable to the slaughter volume for the same period in 2022.

Alberta exported $32.9 million in live hogs in 2022, down 18% from 2021. The value of pork exported in 2022 was $538.5 million, up 4.2% from 2021. The total export volume of hogs (572,768 head) decreased by 5% in 2022 from 2021. The total export volume (143,711 tonnes) also declined in 2022 from 2021 by 3.9%.

January 2023 export value of $2.9 million for live hogs is up 13.1% compared to January 2022, but pork export value of $26.1 million represents a 36.3% drop from January 2022. January 2023 export volume is reported to be 44,496 head of live hogs, an increase of 19.8% over January 2022, and pork export volume of 8,325 tonnes is a drop of 27.4% compared to January 2022.

Chart 2. Alberta Export Value of Live Hogs and Pork

Alberta Export Value of Live Hogs and Pork ($ millions) line graph
Source: Statistics and Data Development Section, Agriculture and Irrigation

The major destination markets for Alberta pork remain Japan, the United States, Mexico, South Korea and China. Value of exports to the U.S., Japan, and South Korea rose in 2022 by 28.8%, 2.92% and 33.75%, respectively. Value of exports to Mexico and China declined in 2022 by 11.17% and 66.93%, respectively.

“The curtailment of imports by China is attributed to China’s recovery of hog stocks. Demand for pork is anticipated to grow in China with the easing of COVID policy restrictions,” says Boyda.

Chart 3. Alberta Export Pork Value

Alberta Export Pork Value (S) bar graph
Source: Statistics and Data Development Section, Agriculture and Irrigation

According to Rabobank quarterly report, the slowing in the U.S. economy is affecting pork demand, and market uncertainties are increasing volatility. China’s reopening is exacerbating the supply-demand balance. The U.S. hog sector contracted in 2022 for the second consecutive year.

U.S. pork production has been declining since 2020; however, USDA projects growth in 2023. The pork decline was attributed to a smaller U.S. hog herd brought on by losses related to COVID-19. High production costs, labour shortages and animal health issues prevented growth. USDA predicts a 1.8% increase in pork production for 2023, most coming in the fourth quarter.

Iowa State University Extension has estimated the cost of raising hogs in the U.S. to have increased 21% in 2022 from 2021. Feed costs increased by 24% and nonfeed variable expenses increased by 18% over the same period. Profit margins are under pressure, even with higher hog prices.

“U.S. National Pork Producers Council reports U.S. pork demand as being exceptionally strong over the past 2 years and is expected to continue strong in 2023. Factors like rising interest rates and high prices for items including groceries and housing could reduce disposable incomes and weaken demand. However, prices and availability of other proteins may lend support to pork demand,” explains Boyda.

For more information, see:

Agricultural Marketing Guide

Contact

Connect with Ann Boyda for more information:
Phone: 780-422-4088

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