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Ron Plain

Demand for hogs for the 4 weeks ending January 31 was up substantially from a year earlier. Slaughter was up 4.4% and weights were heavier, which probably added up to a 5% gain in pork production and prices were up around 15 percent. These kind of relationships between production change from a year earlier and prices do not occur very often.

For all of 2003, live hog demand was up substantially. With production up 1.3% for the year, live hog prices were up from about 11% to 14% depending on series of price. Packers were able to pay these higher prices because pork cut-out values were up over 10% in 2003 compared to 2002.

Based on the best data available the processor and retailer margins declined. Retail pork prices were basically the same in 2003 compared to a year earlier. We believe the odds are high that this data is underestimating the amounts consumers are paying for pork.

Our demand index shows a growth in pork demand at the consumer level of about 1.3% for the last half of 2003. This compares with a loss of about 3% in consumer demand for pork in the first 6 months of 2003 compared to 12 months earlier.

Demand for live hogs in the last half of 2003 was up somewhere between 6 and 10% depending on elasticity used.

If the demand of January and the first half of February 2004 can be maintained through the year, hog prices will be some better this year than in 2003 even with as much as a 2% increase in production from a year earlier.

Pork product prices this Friday were steady to higher from 7 days earlier even with a slaughter at 1954 thousand head --- up 1.7% from a week earlier and up 2.2% from a year earlier.

Loins with a quarter-inch trim at noon Friday were $128.33 per cwt --- up $5.83 per cwt for the week. Boston butts with a quarter-inch trim were at $79 per cwt at noon Friday up $8.00 per cwt, 17-20 pound hams were $55 per cwt compared to $54 per cwt a week earlier and 14-16 pound bellies were $93 per cwt compared to $93 per cwt 7 days earlier. These higher loin prices may be due to strong export demand.

Live cash top hog prices this Friday were $0.50 to $3.00 higher compared to a week earlier. Top live prices Friday morning at select markets were: Peoria $41.50 per cwt, St. Paul $41.50 per cwt and interior Missouri $44.50.

Dressed prices for 185-pound carcasses with 0.9-1.1 inch-back-fat 6 sq.-inch-loin 2 inches deep by area were up $1.89 to $4.47 from a week earlier. These prices by area for Friday morning were: western Cornbelt $61.24 per cwt, eastern Cornbelt $62.76 per cwt, Iowa-Minnesota $61.47 per cwt and nation $62.00 per cwt.

A wild card in pork demand is the outbreak of flue in poultry on the east coast. Broiler exports amount to about 15% of production this much excess on the U.S. market would be negative, especially to pork demand.