Red Ink Looming For Summer Sold Hogs

US Weekly Hog Outlook, 1st April 2006 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 1 April 2006
clock icon 4 minute read

Conditions in the hog industry are too similar to 2002 for comfort. In 2002, we had, for that period, near record production and very strong competition from poultry because of smaller exports of poultry.

In 2006, we are setting near record highs very regularly in production, and poultry exports have been reduced because of bird flu.

In 2002, the high average three-month period for the year was January-March with lower average quarterly prices through the year.

We still have hopes for some seasonal price increase from the first quarter to the second quarter this year, but it is likely to be less than normal.

In the last five years, the second quarter average price was nearly 11% on average higher than the first quarter or $4.59 per cwt live weight.

Live hog prices U.S. basis for 51-52% lean averaged about $42.45 per cwt in January-March of this year. We believe the odds are high for the second quarter price for the same basis hogs as listed above will be less than $47.00 per cwt.

With the record cold storage stocks of poultry and bargain basement prices the odds for no increase in price from the first to the second quarter may be higher than we find comfortable.

The average of the trade estimate for the March 1 Hogs and Pigs report to be released this afternoon are: all hogs and pigs 101.3% of 2005, kept for breeding 101.1% and market inventory 101.3%. We are a bit more bearish for the report with our estimate at 102% for all categories.

Cash hog prices were pushed lower again this week. The top live prices Friday morning were $1.00 per cwt to $3.00 per cwt lower than a week earlier. These prices for select markets were: Peoria $35.50 per cwt, St. Paul $37.00 per cwt, Sioux Falls did not report and interior Missouri $37.25 per cwt.

The weighted average carcass price for negotiated hogs Friday morning were $0.97 per cwt higher to $1.46 per cwt lower than 7 days earlier. The negotiated weighted average carcass prices Friday morning by geographic area were: western Cornbelt $54.09 per cwt, eastern Cornbelt $54.05 per cwt, Iowa-Minnesota $54.36 per cwt, and nation $53.96 per cwt.

Cash feeder pig prices this week at United Tel-o-Auction were some lower than 2 weeks earlier, but still very good. These prices by weight groups were: 40-50 pounds $115.00 per cwt, 50-60 pounds $95.00-$127.00 per cwt.

We are not very optimistic for producers who have purchased feeder pigs this spring. It now looks like most of these producers will see some red ink on the summer sold hogs.

Slaughter this week under Federal Inspection was estimated at 1,973 thousand head, up 0.4% from a year earlier.

The Hogs and Pigs report came in more bullish than trade estimate or our estimate. The total number of hogs and pigs was up 0.7%, the breeding herd up 1.4%, the market herd up 0.6% from a year earlier.

If this report is correct and we have some concern it is underestimates marketings in coming weeks. The 180 pounds and heavier market inventories were up 1.7%, but hog slaughter in March was up 2.9%.

If marketings are consistent with the report in coming weeks we will get some seasonal increase in hog price. Our current estimate is for 51-52% lean hogs to average $44.00-$47.00 per cwt in the second quarter compared to $43.20 in the first quarter.

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