Hog prices increase substantially

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Ron Plain

Even though hog slaughter this week was close to a year earlier, slaughter for the last three weeks has been down 2% based on preliminary data. Slaughter for this week at 1866 thousand head under Federal Inspection was up 0.2 from a year earlier.

The slaughter this week being close to the same week in 2002 is probably due to slaughter being down nearly 4% last week from a year earlier.

Hog prices have increased substantially with the smaller slaughter. Spot market live hog prices are $7-$10 per cwt above a year earlier and negotiated carcass base prices are $12-$13 per cwt above twelve months ago.

It is quite obvious that the more inelastic demand for live hogs is being reflected in current supply-price relationships.

We expect slaughter to continue to run down 1%-3% through June then be down 3%-5% for the third quarter.

We believe August prices at the terminal markets could be $10-$13 per cwt higher this year than in 2002.

At current time it is clear that the more inelastic demand for live hogs is at the slaughter level. Retail prices in March were nearly $0.09 per pound below March of 2002, and the odds are high for both April and May prices to still be below twelve months earlier.

Pork product prices this Friday were mixed compared to last week. Loin prices for 21 pound and down with ¼" trim was down $2.20 per cwt from last Friday at $103.20 per cwt. Boston butts were up $8.09 per cwt at $74 per cwt. Hams were steady compared to last week at $44 per cwt for 17-20 pound hams. Bellies were up $2 per cwt with 12-14 pound bellies at $93 per cwt.

Product prices will need to increase from current levels to be able to push live hog prices much higher.

There is substantial discussion at current time in press and papers being released concerning the country of origin labeling of meat.

The estimated costs vary substantially depending on who releases them. There will be additional costs and they may be as large or larger than any of the estimates if the law is enforced as written. We do not see the costs for the hog industry being as large as for the beef industry per pound of product. The major reason for the higher costs for beef is due in part to the many different owners most cattle have and the co-mingling of cattle from different owners and maybe even feeder cattle from Canada and Mexico being co-mingled in the production process.

The co-mingling of these cattle from different owners is why most people believe that at least in cattle individual animal identity will be needed.

The big cost probably will be at the packer and processor levels due to the added equipment that will be necessary to identify the origin of the product.

The one thing that you can be sure of is that these costs will not be born by the marketing system --- either the producer for consumer will pay the bill in the long run.

As indicated earlier, hog prices did well this week with gains of $2 to $5.50 per cwt live and $3 to $5 per cwt in carcass.

Top prices Friday morning at selected markets were: Peoria $40.50, St. Paul $42.50, Sioux Falls $43.50, and interior Missouri $38.50.

The weighted average price for 185 pound carcass with 0.9-1.1 inches of backfat six square inch loin two inches deep by area was: Western Cornbelt $56.49, Eastern Cornbelt $55.09, Iowa-Minnesota $56.59, and Nation $55.81.