Breeding herd reductions continuing as prices show modest gains

US Weekly Hog Outlook, 14th March 2003 - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.
calendar icon 15 March 2003
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Ron Plain
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Both gilt and sow slaughter continue to run above a year earlier. For the week ending March 1 this year sow slaughter was up 1.3% and gilt slaughter was up 1.9% from 2002. For year to date through March 1 sow slaughter was up 6.2% and gilt slaughter was up 1.5%. The sow slaughter is adjusted for the size of the breeding herd. We believe the probabilities are high that producers are continuing to reduce the breeding herd at least at a relative slow rate.

There is a tendency for the negotiated price of hogs to be higher in the afternoons than in the morning. For November, December, January, and February the eastern Cornbelt price was 1.8% higher than the morning and in the western Cornbelt price was 0.7% higher than the morning price. In the eastern Cornbelt, all four months had a higher average afternoon price than the morning price but in the western Cornbelt only 3 of the 4 months had a higher afternoon price than morning price.

Based on the mandatory price reporting data the percent negotiated priced hogs in the US dropped to 13.5%. This compares with 16.7% a year earlier and 17.3% 2 years earlier.

Even though the rate of decline in the number of negotiated priced hogs has declined during the last two years, this 3 percentage point decline this past year increases the urgency for the industry to develop some form of price development to tie all of the marketing contracts to that use the negotiated market price.

Nearly 25% of the hogs had a marketing contract that shifted price risk. Over 31% of the independents produced hogs were priced with a price risk shifted contract. Nearly 23% of these price risk shifted contracts were tied to futures market. Seventy seven percent of the contracts tied to feed prices or a window type contract were tied to feed prices and 23% were a window risk-sharing contract. Sixty one percent of the latter 2 types of contracts had a ledger and 39% had no ledger. This means only about 13% of the hogs priced using a contract that truly shifted price risk. However, remember some of the marketing contracts with a ledger do have a sunset clause after a certain number of years.

Cash slaughter hogs prices showed modest gains this week. Friday morning the top live hog prices were from steady to $1.50 per cwt higher than 7 days earlier. Top prices for select markets were: Peoria $34.50, St. Paul $35.00, Sioux Falls $35.00, and interior Missouri $34.00. The average prices by regions for the 185th carcass with 0.9-1.1" backfat 6 sq. inch loin 2" deep was: Western Cornbelt $48.02, Eastern Cornbelt $47.18, Iowa-Minnesota $47.99, and Nation $47.80 per cwt.

Wholesale pork prices for this Friday noon were: ¼" trim loins$94.00 per cwt, up $3.25 per cwt, boston butts $55.00 per cwt, up $1.62 per cwt, 17-20# hams $54.60 per cwt down $0.40 per cwt, and 12-14# bellies $85.00 per cwt, up $2.00 per cwt compared to last Friday.

Slaughter under Federal Inspection was estimated at 1904 thousand head this week up 0.4% from a year earlier.

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