Ron Plain

The USDA December 1, Hogs and Pigs report came in very close to trade expectations. The USDA estimates were: market herd 100.3%, breeding herd 100.7%, and total herd 100.4% of the same date in 2004.

The breeding herd estimate is some below our estimate. The gilt and sow slaughter data indicates the growth in the breeding herd was likely larger than the estimate by the USDA.

The market inventories and farrowing intentions indicate slaughter in 2006 will be some larger than 2005. It now looks like 2006 will be the fifth consecutive year of increased hog slaughter and pork production. Do we no longer have a predictable hog production cycle?

If demand does not weaken too much and pork production is near the levels indicated by the December Hogs and Pigs the average producer should be profitable at least for the first 9 months of 2006.

Demand for pork at the consumer level continues to decline. For January - November the demand at the consumer level was down 4.7% from the same time period in 2004. For the 3 month period of September - November demand for pork at the consumer level was down 6 percent.

The good news is that the demand for live hogs for January - November was down only 0.5% from 12 months earlier. But the demand for live hogs for September - November was down 3.1% from a year earlier. The September - November decline amounted to only 28% of the growth in live hog demand for September - November of 2004 over the same period in 2003.

We are hopeful that we can end 2006 with a loss of only 50% of the 2004 live hog demand growth.

Average slaughter hog weights continue to set new record highs. For the week ending December 24, the average live weight for barrows and gilts in Iowa - Minnesota was 270.5 pounds --- up 4.8 pounds from a year earlier. The average barrow and gilt carcass weight under Federal Inspection was from 200 to 201 pounds for the 4 week period ending December 17, 2005. The odds are high that we will add about 0.75% to pork production in 2005 over 2004 due to heavier weighted hogs.

Pork product prices were mixed this week but on average drifted a little lower. Loins with ¼" trim at $98.60 per cwt down $4.00 per cwt, Boston butts with a ¼" trim down $2.19 per cwt this Friday morning, 20-23 pound hams at $60.00 per cwt up $2.00 per cwt from a week earlier and 14-16 pound bellies were unavailable.

Cash hog prices this Friday morning were basically steady with a week earlier. The top live prices for select markets were: Peoria $38.00 per cwt, St. Paul $41.00 per cwt, Sioux Falls was unavailable and interior Missouri $38.75 per cwt.

Weighted negotiated carcass prices were from $0.06 lower to $1.01 higher Friday morning compared to a week earlier. The carcass prices by areas were: western Cornbelt $57.75 per cwt, eastern Cornbelt $57.58 per cwt, Iowa - Minnesota $57.82 per cwt, and nation $57.68 per cwt.

Slaughter levels are expected to drift lower in coming weeks. The amount of price strength will depend on demand.

Slaughter this week under Federal Inspection was estimated at 1805 thousand head --- up 1.3% from a year earlier.