Wholesale value decline cause of price weakness

US Weekly Hog Outlook, 26th September 2003 - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.
calendar icon 27 September 2003
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Ron Plain
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USDA's September hogs and pigs report said the nation's market hog inventory was 2% smaller than a year ago and the breeding herd was down 3%. Both numbers are in line with trade expectations. This was not the case for farrowing intentions. Fall farrowings are predicted to be down only 1% and winter farrowings are expected to be even with a year earlier. The pre-release trade estimates were more optimistic. The inventory of market hogs weighing more than 180 pounds on September 1 was down 5%, pigs weighing 120-179 pounds were down 2%, and the inventory of pigs under 120 pounds were down 1%. The best way to describe the report is bearish.

Cash hog prices ended the week $2-5 lower than where they started. Peoria topped out at $40/cwt on Friday, the same as seven days earlier. Sioux Falls was $3 lower than last Friday with a top of $39/cwt and St Paul had a top of $38.50/cwt on Friday. Interior Missouri hogs had a $38.50 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 $56.33/cwt, $3.45 lower than the previous Friday. Regional prices on Friday morning were: eastern corn belt $57.51, western corn belt $55.18, and Iowa-Minnesota $54.66/cwt. Iowa-Minnesota was $5.39 lower than the previous Friday.

Much of the weakness in hog prices can be traced to a decline 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 $1.065 per pound, down 10.3 cents for the week. Boston butts lost 11.55 cents for the week to 71.45 cents per pound at midday on Friday. Ham prices were two and a half cents lower at 65.67 cents per pound on Friday for 17-20# hams. 12-14 pound pork bellies, however, were up a nickel for the week at 92 cents per pound.

Federally inspected hog slaughter for this week is estimated to be 1.999 million head, down 1.4% from the same week last year and below year-ago for the sixth consecutive week. Because of last week's hurricane, hog slaughter on the east coast was curtailed early this week. Tomorrow's estimated slaughter is 140,000 head. That will be the largest Saturday kill in a non-holiday week since December. Year-to-date slaughter is down 0.9% compared to last year but year-to-date pork production is down only 0.2%. Obviously, weights are up. Last week's live barrow and gilt weights in Iowa were 260 pounds, 2.5 pounds more than a year ago. The October lean hog futures contract ended today at $56.42, down $4.15 from last Friday. The December contract settled at $55.85 today, down 2.42 for the week. February closed the week at $58.10.

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