Hog slaughter for the 1st quarter, 2004 up 4.3%

by 5m Editor
3 April 2004, at 12:00am

US Weekly Hog Outlook, 2nd April 2004 - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.

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Ron Plain
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Based on the March 1 Hogs and Pigs report, hog slaughter in the U.S. will likely stay above a year earlier through at least the 3rd quarter.

Remember a portion of this growth was due to one more weekday in the January-March quarter this year than in 2003. Without that extra day, slaughter would probably have been up a little less than 3% for the quarter this year compared to 12 months earlier.

Our estimate of the 2nd quarter slaughter is for about a 3.5% increase from 2003. The heavier market weight inventories were up about 2.2% from a year earlier and we expect a 1% or more increase in slaughter this quarter from larger slaughter hog imports from Canada.

Even with this larger slaughter, hog prices are expected to be 13-20% higher than in 2003, if we can hold the exceptionally strong demand of the 1st quarter.

We have convinced ourselves that the low-carb diets are a major factor in this strong demand. If so, we must remember that most weight-loss diets are fads that come and go. If these diets are a major part of the growth in demand, this growth may not be sustainable. We are convinced that the life of this extremely large increase in demand may be relatively short. But, we have a very strong demand built into hog prices for the next 12 months.

USDA revised the 4th quarter slaughter in 2003 from the original release and the slaughter 27.608 million head was a record high for the quarter, up slightly from the previous record of 27.586 million head in 1998.

This is concrete evidence that packers have learned how to get more hogs slaughtered in a day now than 6 years ago even though 2 slaughter plants have closed since the 4th quarter of 1998.

Hog producers continue to get more pigs from a smaller number of sons. Based on data from the March Hogs and Pigs report, U.S. producers produced 4.2% more pork per animal in the breeding herd for the 12-month period ending February 29, 2004 than a year earlier.

For the last 5 years U.S. hog producers have increase productivity growth in the breeding herd by an average of 3.32 percent.

We believe there is an opportunity for productivity growth to continue for several years in the U.S.

The best data we can put together from the hog structure study of the U.S. is that producers on average, market less than 19 hogs per sow per year. There are some countries that the number marketed per animal in the breeding herd averages above 20 per year.

Pork product prices were mixed this Friday morning compared to a week earlier. Loins with a quarter-inch trim at $112.00 per cwt were up $4.00 per cwt for the week. Boston butts with a quarter-inch trim at $82.50 per cwt were down $1.00 per cwt, 17-20 pound hams at $51.00 per cwt down $2.00 from last week and 14-16 pound bellies at $114.00 per cwt were up $4.00 per cwt from 7 days earlier.

Packers were able to improve their margins this week but probably still do not have the margins they need.

Cash live hog prices were $1.50 to 3.50 per cwt lower this Friday and average negotiated base prices by area for 185 pound carcasses with 0.9-1.1 inch back fat, 6 square-inch loins, 2 inches deep were $2.62 to 3.30 per cwt below a week earlier.

The top prices for live hogs at the available markets were: Peoria $42, St. Paul $45, Sioux Falls $43.50 and interior Missouri $43.75.

The average price for carcass hogs by area were: western Cornbelt $61.47, eastern Cornbelt $63.89, Iowa-Minnesota $61.63 and nation $62.50.

Cash feeder pig prices this week at United Tel-o-auction were mixed, but mostly $10-20 per cwt higher than 2 weeks earlier.

The prices by weight groups at United this week were: 40-50# $100-110 per cwt, 50-60# $108.50, and 60-70# $77.50-107. The 77 dollar pigs in the 60-70# category was a small group in a barn in extreme south Missouri. The $107 60-70# pigs were single ownership shipped farm to farm.

Slaughter this week under Federal Inspection was estimated at 1928 thousand head --- up 2.3% from the same week in 2003. This is the first time we have killed more than 1.9 million hogs under Federal Inspection for the first week ending in April.

5m Editor