Hog Weights Continue To Run Record Levels

US Weekly Hog Outlook, 24th February 2006 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 25 February 2006
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Ron Plain
Ron Plain

Hog weights continue to run at record high levels but slaughter numbers for the past three weeks have been below a year earlier. With the smaller number slaughtered, hog prices have rallied back into the solid profit level for the average producer.

Sow slaughter continues to run below a year earlier. For the year through the week ending February 11, sow slaughter is below a year earlier by 3.6%. However, even though gilt slaughter ran below the five-year average in December, January's gilt slaughter was near the 5 year average and the first three weeks of February is near the five-year average for February. If we are building the breeding herd, it is at a slow rate based on gilt and sow slaughter for the last two months.

Retail pork prices for January were down 0.8% from December of 2005 and down 2.5% from January of 2005. All of the decline in retail prices plus some was passed on to the producer. Prices received by producers in January were 22% below the same month in 2005.

Most of the gain to marketers by the lower hog prices went to the processor-retailer segment. The packers margin in January was up only 0.8% while the retailers and processor margin was up 9% from 12 months earlier.

Good news from the north this week. Canada released their hogs and pigs report for January 1, the total number of hogs and pigs on farm were down 1.2% from a year earlier. The breeding herd was down 0.2% and the market herd was down 1.3% from 12 months earlier.

Due to the strength of the Canadian dollar relative to the U.S. currency, Canada's hog producers are in a profit squeeze. Reports from north of the border are that additional reductions in the Canadian herd will occur unless the US dollar gains in value relative to the Canadian dollar.

Hog prices bounced around this week but held most of the gains of last week for carcass base prices and terminals ended the week from $1.00 higher to $0.75 lower compared to seven days earlier.

The top live prices this Friday morning for select markets were: Peoria $40.00 per cwt, St Paul $N/A per cwt, Sioux Falls $N/A per cwt, and interior Missouri $41.00 per cwt.

The average weighted base price for carcasses this Friday morning were $0.90 lower to $3.08 higher compared to a week earlier. The weighted average base price by area this Friday morning were: western Cornbelt $60.57 per cwt, eastern Cornbelt $61.66 per cwt, Iowa-Minnesota $60.53 per cwt, and nation $61.06.

Additional gains in hog prices seasonally are expected as we go from winter into spring. The futures price for live hogs at current time indicate live prices in the low 50s and carcass prices in the low 70s in June.

Slaughter this week under Federal Inspection was estimated at 1947 thousand head down 1.2% from a year earlier.

Demand for hogs at the live level for November - January was down only 1.6% from 12 months earlier. The stressed prices in January was mostly due to supply.

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