Tighter Beef Supplies May Help Pork Prices

US Weekly Hog Outlook, 10th October 2003 - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.
calendar icon 11 October 2003
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Ron Plain
Ron Plain

The demand for pork at the consumer level continues to be quite weak. Our estimated demand index for January to August showed a decline between 3 and 4% compared to 12 months earlier. The good news is that the demand for live hogs for the 1st 8 months of 2003 was up between 1 and 2% from a year earlier.

Retail pork prices in August were up 1.6% from July and up 1.5% from August of 2002. However, retail pork prices for January to August were still almost 2% below the same months last year.

We have been concerned because we do not appear to be getting much, if any, demand strength in pork prices from the record high beef prices.

At least a portion of the reason may be due to the fact that the big shortage of beef is choice grade or higher. In September, yield 3 choice beef wholesale prices were about 23% higher than in January. However, select yield 2-3 wholesale prices were up only about 6 percent.

The major competition in retail food stores between beef and pork may be mostly select beef. With the smaller supplies compared to last year of yield 2-3 select beef in recent weeks and expected tight supplies in coming weeks we may see substantially higher select beef prices. If so, maybe it will be positive to pork prices as we move through the large pork supplies of fall and early winter.

Cash hog prices stabilized some this week with terminal market prices from down $2.25 to up $1 from a week earlier.

Top live prices at the terminal markets this Friday morning were: Peoria $35.50, St. Paul $37.50, Sioux Falls $38.00 and interior Missouri $34.00. Average weighted prices for 185 pound carcasses with 0.9-1.1 inch back fat, 6-square-inch loin, 2 inches deep by geographic areas were from $0.03 higher to $0.08 lower than a week earlier. These prices Friday morning by area were: western Cornbelt $52.37, eastern Cornbelt $52.49, Iowa-Minnesota $52.50 and Nation $52.42.

Pork product price were mixed for the week. Pork loin ¼ inch trim at &$100.00 per cwt Friday morning were up $1.37 per cwt for the week. Boston butts with ¼ inch trim at $70.00 per cwt were up $8.69 from 7 days earlier. Both hams and bellies were lower with 17-20 pound ham at $55.00 Friday morning down $4.67 per cwt and 12-14 pound bellies at $87.00 per cwt down $7.00 per cwt compared to Friday 7 days earlier.

We hope our data is giving us false signals as to what producers are doing to the size of the breeding herd. Sow slaughter for the 4 weeks ending September 27th was up 2.7% from a year earlier. However, we are getting larger imports of cull sows and boars from Canada in recent weeks than a year earlier. Sow slaughter from domestic producers was down almost 19% for the 4 weeks ending September 27th compared to 2002. Gilt slaughter for these 4 weeks was also down by about 1.5% from a year earlier. Remember we were reducing the breeding herd at this time last year. However, this much reduction in slaughter of females is probably at least enough to stop the decline in the herd and may be building the herd some. We received a report that the cull sows and boars being imported from Canada may be overstated. We certainly hope so.

With the indicated productivity growth in the September hogs and pigs report, we need to continue to reduce the breeding herd; not even holding the breeding herd level is good news.

We believe the probabilities are high that the breeding herd needs to be reduced substantially from current levels in the next 5 years to get the hog prices most producers need.

Hog slaughter this week continues to run higher than expected. Slaughter this week under Federal Inspection was estimated at 2081 thousand head --- up 3.0% from a year earlier.

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