Optimism over summer hog prices

US Weekly Hog Outlook, 10th January - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.
calendar icon 11 January 2003
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Ron Plain
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USDA's January crop report found more grain stocks than the trade was expecting. This sent the futures market sharply lower on Friday and should help end the run-up in the cost of raising hogs that began last July. The breakeven price for the typical hog was about $2.50 higher in the fourth quarter of 2002 than a year earlier.

The futures market continues to be optimistic about summer hog prices. The May, June and July contracts ended the week at $63.65, $64.60 and $62.15, respectively. Each is more than $20/cwt higher than today's carcass price for hogs. Although the seasonal trend favors a significant increase in hog prices from January to June, the predicted run-up this year is one of the largest. Since 1989, hog prices have increased an average of 18% from January to June. The biggest increase was 43% in 2001. Last year, barrow and gilt prices declined by 6% from January to June.

Although almost everyone expects 2003 hog slaughter to be below last year's total, it is not just fewer hogs that are creating the optimism for summer prices. The total supply of red meat and poultry will be down by 1.7% according to USDA's latest forecast. Fed cattle prices were over $77/cwt this week. That's $11 higher than at this time last year.

Sioux Falls and St Paul reported practical tops of $30.50/cwt on Friday. Peoria had a top of $29/cwt as did the Interior Missouri market. The National weighted average carcass price Friday morning for negotiated hogs with 0.9-1.1" backfat, 6 sq. in. loins 2" deep was $40.89/cwt, $1.30 lower than last Friday. Regional prices on Friday morning were: eastern corn belt $40.98, western corn belt $40.84, and Iowa-Minnesota $40.90/cwt.

The total federally inspected hog slaughter for this week is 1.935 million head, down 1.8% from the same week last year. Since December 1, hog slaughter has been 0.9% higher than the same period last year. USDA's December hogs and pigs survey estimated 2% fewer in the 180 pound and up inventory on December 1. This higher-than- expected slaughter put extra pork on the market and pressured cut- out values, especially loin prices. On Tuesday, wholesale loins and pork bellies both sold for 81 cents per pound. Packers cut way back on their Saturday slaughter schedule.

At mid-day on Friday, 1/4 inch trim loins weighing less than 21 pounds were trading at 90 cents per pound, up 3? for the week. The wholesale price of Boston butts dropped 2 cents to 50 cents per pound. Ham prices were up 1.5 cents at 44.6 cents per pound for 17- 20# hams. Pork bellies dropped 4 cents from last Friday with 12-14 pound bellies ending the week at 77 cents per pound.

Feeder pig prices trended seasonally higher this week. United Producers' tel-o-auction prices were: 40-50# $88-92/cwt; 50-60# $82- 90.50/cwt; 60-70# $66-80/cwt; 70-80# $61-75/cwt; and 80# and up $55.50-58/cwt.

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