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Daily slaughter through June up 4.5%

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

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

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Ron Plain
Ron Plain

The June Hogs and Pigs report showed the total herd was up 0.8 percent on June 1, the breeding herd was down 1.5 percent, and the market herd was up 1.1 percent from 12 months earlier.

We are somewhat concerned that the market inventories are underestimated. The 180-pound and larger inventory was up only 1.8 percent, but daily slaughter through June was up about 4.5 percent. The under-60-pound market inventory was down 0.6 percent but the March-May pig crop was only down 0.4 percent. We imported nearly two hundred thousand more feeder pigs from Canada in April and May than a year earlier. A high percentage of these pigs are weaners, which suggests they would have been included in the under-60-pounds inventory on June 1.

Based on the current rate of growth in productivity, producers will need to continue to reduce the size of the breeding herd to maintain the current level of price. Productivity for the year ending May 31, 2004, increased nearly 3.8 percent and productivity growth for the last 5 years ending May 31 averaged nearly 3.2 percent each year. Therefore, producers will need to reduce the breeding herd more than 1.5 percent annually, unless demand keeps increasing, which is not the most likely. Hopefully the current level of demand can be maintained.

Preliminary data shows a growth in demand for pork in January-May 2004 of about 3 percent. We believe the current retail pork price does not reflect the actual demand for this year. The data shows retail pork chops were about 20 cents per pound below a year earlier with the wholesale price for loins up about 20 cents per pound for this 5-month period compared to a year ago. Demand for live hogs was up nearly 12 percent for January-May 2004 compared to 2003. This indicates more than the retail price increase was bid into live hog prices since the farm-retail spread was 4 percent smaller than a year ago for the first 5 months of 2004. Why would the margin narrow with 3.9 percent larger slaughter than in 2003? When slaughter is up, it is normal for the market spread to widen, not narrow.

One can associate about one-quarter of the increase in demand for live hogs with the increase in pork exports. But, when live slaughter hog imports are included, they balance out most of the increase in pork exports. The total pork and live hog imports figure indicates that most, if not all, of the increase in live-hog demand came from the U.S. market.

Earlier we assumed this strong demand would be short-lived. We now believe a major portion of the stronger demand is due to the publicity about the low-carb diets being positive for meat. This publicity has increased the consumption of meat by more of the population than just those who are on the low-carb diets. We now believe the demand may be strong enough to hold hog prices at the terminal markets in the low to mid 40s for the fourth quarter, assuming hog slaughter remains close to year-earlier levels.

Hog slaughter this week under Federal Inspection was estimated at 1794 thousand head. However, it is difficult to make a comparison with last year because the Fourth of July was celebrated in this week in 2003.

Pork product prices on average ended higher than a week ago. Pork loins with 1/4-inch trim at $123.00 per cwt were up $5.00 per cwt from last week; Boston butts with 1/4-inch trim were down $3.50 per cwt at $90.00 per cwt; 17-20-pound hams were up $1.79 per cwt at $69.36 per cwt; and 14-16-pound bellies were up $4.50 per cwt at $120.50 per cwt.

Cash live hog top prices were from $1.50 to $3.50 per cwt below a week earlier this Friday morning. Top prices for select markets were: Peoria $53.50 per cwt, St. Paul $52.50 per cwt, Sioux Falls $N/A per cwt, and interior Missouri $54.00 per cwt.

The weighted average price for 185-pound carcasses with 0.9-1.1-inch back fat, 6-square-inch loin, 2-inches deep by area were: western Cornbelt $76.09 per cwt, eastern Cornbelt $77.44 per cwt, Iowa-Minnesota $76.31 per cwt, and nation $76.83 per cwt.

Have an enjoyable Fourth of July holiday.

5m Editor