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Hog Slaughter Continues To Run Above Expectations

by 5m Editor
25 March 2006, at 12:00am

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

Ron Plain
Ron Plain

The U.S. meat industry is drowning in chicken. The U.S. disappearance of chicken in December, January, and February this year was up about 10% from 12 months earlier.

This is probably the factor that is the most negative for both beef and pork prices. For these same three months, the total supply of pork domestically was up 1.1% and beef was down 1.2% from a year earlier.

Slaughter of hogs has been running some above our expectations based on the Hogs and Pigs report. For example, after adjusting for live hog imports, the slaughter indicates the June-August pig crop was up 101.9% from 12 months earlier. The most recent Hogs and Pigs report shows the June-August 2005 pig crop up 100.4% from a year earlier. Therefore, we believe there is a chance that USDA will do some revision in the March report.

Our gilt and sow slaughter data indicated the breeding herd in both September and December 2005 was some larger than the USDA official estimate.

Our estimate of the March Hogs and Pigs, which will be released on Friday, March 31, is for the total herd to be 102% of 2005, market herd 102%, and breeding herd 102% of 12 months earlier.

Our estimate of the March-May farrow is 101% of a year earlier. For the June-August farrow, we expect an increase of 2% from 2005.

The average retail price of pork in February was up 1.2% from January, but down 1.5% from February 2005. For the average of January-February 2006, pork retail prices were 2% below 12 months earlier.

The processor-retailer margin for January-February this year was up 8.2% from 2005. However, the packers' margin was down 2.6% and live hog prices were down a bit over 19%.

There continues to be much publicity about Asian flu from poultry. In the countries that have found this disease, the consumption of chicken has declined sharply in most instances. The reduced exports of chicken is the reason for record cold storage stocks of chicken and reduced exports.

We believe this large supply of low cost poultry is a major portion of the hog industry problems in recent weeks.

Cash hog prices this Friday morning were up $0.75 to down $1.50 compared to seven days earlier. Top live prices Friday morning for select markets were: Peoria $36.50 per cwt, St. Paul $38.00 per cwt, and interior Missouri $40.25 per cwt.

Weighted negotiated carcass prices this Friday morning were $0.90 to $3.07 lower compared to a week earlier. Weighted average negotiated carcass prices by area Friday morning were: western Cornbelt $53.33 per cwt, eastern Cornbelt $55.50 per cwt, Iowa-Minnesota $53.39 per cwt, and nation $54.45 per cwt.

Slaughter was shortened this week by weather and tight packer margins. Saturday slaughter this week was estimated at 2 thousand head. Total weekly slaughter under Federal Inspection was estimated at 1943 thousand head down 0.3% from the same week in 2005.

5m Editor