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Hog slaughter continues to run above expectations

by 5m Editor
4 February 2006, at 12:00am

US Weekly Hog Outlook, 3rd February 2006 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

Ron Plain
Ron Plain

The last four weeks slaughter has been about 3% above a year earlier based on preliminary data. On top of the 3% increase in number slaughtered weights have averaged about 1.5% heavier than 12 months earlier.

We have been extremely concerned about the demand for live hogs so far this year. However, when one considers we have produced around 4.5% more pork in the past four weeks, with the extremely inelastic demand we have had for the past 10 years, we can explain most of the weakness in hog prices to supply.

We still believe we have lost some demand because of the reduction in high protein diets and the increase in competition from chickens. The wholesale price for boneless chicken breasts in January this year averaged $0.98 per pound compared to $1.40 per pound in January 2005. The bottom line is that pork production is up between 4 and 5% and if we can finally see some seasonal reduction in supply, prices are likely to strengthen.

We have confirmed that circle virus is impacting at least some of the producers in North Carolina. Apparently, so far, this disease is only in the finishing herds but the death loss can be quite high. Are death losses significant enough to impact slaughter in coming months enough to be meaningful? We do not have enough information to answer this question.

Cash hog prices rallied some in early weeks but ran into troubles in late week as the pork cutout value declined.

Live top prices Friday morning were $1 higher to $2 lower compared to a week earlier. These top prices for select markets were: Peoria $33.50 per cwt, St. Paul $38.00 per cwt, Sioux Falls $38.00 per cwt, and interior Missouri $36.50 per cwt. Weighted average base carcass prices were: western Cornbelt $51.61 per cwt, eastern Cornbelt $51.93 per cwt, Iowa-Minnesota $51.77 pre cwt, and Nation $51.60 per cwt.

Cash feeder pig prices this week at United Producers Tel-O-Auction were $10-20 per cwt higher than two weeks earlier. The range in prices by weight groups was: 40-50 pounds $131 per cwt, 50-60 pounds $121-132.50 per cwt, 60-70 pounds $95-117.50 per cwt.

The summer futures lean hog contracts were pushed some lower this week. Possibly hedging pressure by producers. Slaughter this week under Federal Inspection was estimated at 2,030 thousand head, up 2.5% from 12 months earlier.

5m Editor