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Hog Outlook: Big Losses for Iowa Pig Producers

18 January 2016
Ron Plain
Ron Plain

US - Calculations by Lee Schulz at Iowa State University estimate Iowa farrow-to-finish producers lost $18.40 for each hog marketed during December. That is the biggest monthly loss since April 2013. For all of 2015, producers averaged a profit of $7.93 per hog marketed, write Ron Plain and Scott Brown, Ag Economics, MU.

Dr. Schulz estimates the cost of production for hogs marketed in December at $45.02/cwt of live weight ($60.02/cwt of carcass). That is the lowest cost for any month since January 2007. Average production cost for 2015 were $47.98/cwt (live), the lowest since 2007.

Hog prices are slowly climbing. The national negotiated barrow and gilt price on the morning report today was $50.79/cwt, up $1.80 from last Friday morning. The western corn belt averaged $52.63/cwt this morning, up $2.36 from last Friday morning. There were no negotiated price quotes this morning for the eastern corn belt or for Iowa-Minnesota. The top price today at Peoria was $34/cwt, up $2 from last Friday. The top price for interior Missouri live hogs today was $35.25/cwt, up $2.25 from a week ago.

Friday morning's pork cutout value was $71.69/cwt FOB the plants. That is up 92 cents from the week before, but down $12.39 from a year ago. Ham and belly prices were higher this week, loins lower. This morning's national negotiated hog price was only 70.8% of the cutout value.

This week's hog slaughter was 2.3 million head, down 2.9% from last week, but up 2.5% from the same week last year. Preliminary data indicates that 2015 hog slaughter was up 8.1%, compared to last year, but because of lighter weights, pork production was up only 7.3%.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 286.3 pounds, unchanged from the week before and down 1.7 pounds from a year ago. Iowa-Minnesota slaughter weights have been below the year-ago level for 41 of the last 42 weeks. For all of 2015, Iowa-Minnesota slaughter weights averaged 282.0 pounds. That is the second highest year ever behind 2014's record of 284.4 pounds.

Slaughter capacity has been stressed and packer margins good in recent months. Pork packer's gross margin (cutout plus byproduct minus net purchase price) was down slightly in 2015 compared to 2014. None the less, it was the second highest in the last decade. These good margins are the main reason two new hog slaughter plants are being built. Once these plants come on line in 2017, the added kill capacity should cause packer margins to shrink.

The February hog futures contract ended the week at $62.025/cwt, up $2.18 from the week before. April hogs gained $2.23 this week to close at $67.45/cwt. The June lean hog futures contract ended the week at $78.375/cwt, up $1.30 from the preceding week.

The March corn futures contracted settled at $3.63 per bushel today. That is up 6 cents from last Friday.

ThePigSite News Desk



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