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Ron Plain

Record high beef prices finally seem to be giving pork cutout values a boost and that's driving-up hog prices. Of course, it doesn't hurt that this was the seventh consecutive week with hog slaughter below year-ago levels.

Hog prices ended the week $3-4 higher than where they started. Sioux Falls topped out at $46/cwt on Friday, $4 higher than seven days earlier. St Paul had a top of $45/cwt and Peoria had a top of $44/cwt on Friday. The interior Missouri market had a $44.50 top on Friday. The National weighted average carcass price Friday morning for negotiated hogs with 0.9-1.1" backfat, 6 sq. in. loins 2" deep was $61.98/cwt, $3.90 higher than the previous Friday. Regional prices on Friday morning were: eastern corn belt $61.33, western corn belt $62.53, and Iowa-Minnesota $62.39/cwt.

Much of the rise in hog prices was due to a strong rally in the wholesale value of pork product, especially loins and butts. At mid- day on Friday, 1/4-inch trim loins weighing less than 21 pounds were trading at $1.30 per pound, up 16 cents for the week. Boston butts gained 13 cents for the week to 85 cents per pound at midday on Friday. Ham prices were half a cent higher at 45.5 cents per pound for 17-20# hams. 12-14 pound pork bellies held steady for the week at $1.00/pound, although they reached $1.05 earlier in the week.

Federally inspected hog slaughter for this week is 1.824 million head, down 3.2% from the same week last year. Year-to-date slaughter is basically even with last year. Year-to-date sow slaughter as a percent of the sow herd is up 7.5% compared to the same period in 2002. Weights are close to year ago levels.

Looking ahead, there is good reason to expect a continuation of the price rally. Seasonally, slaughter weights will decline as the weather gets hotter. USDA's March hogs and pigs report implied that summer slaughter numbers would be 2% or so below last year. The August lean hog futures contract (it closed today at $69.47) is higher than the July contract (it had a $68.35 close today) which is higher than June ($66.17 close) which is higher than the current cash market. August isn't the odds-on-favorite for the peak in hog prices, but it was the top price month in both 1995 and 1996.

We believe the breeding herd is still declining, but at a slowing rate. USDA is currently conducting their June inventory survey. The results will be released on June 27.