Hog Prices Jump Up 15%

US Weekly Hog Outlook, 23rd June 2006 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 24 June 2006
clock icon 4 minute read
Ron Plain
Ron Plain

The last two weeks has seen one of the biggest moves in hog's prices in my experience.

It is a supply-driven move. Slaughter under Federal Inspection the last two weeks has been down about 3%, but prices are over 15%.

The reduced supply is probably a combination of circovirus, late summer breeding problems last year due to high temperatures, and some hotter temperatures in May and early June this year in the western Cornbelt.

The more inelastic demand for live hogs in recent years is also a contributor to the sharply higher prices.

This more inelastic demand for live hogs is reflected in the decrease in the price of hogs seasonally from the summer highs to fall lows even though the increase in supply in recent years has changed less.

In the 1970s, daily pork products increased about 30% from July to November and live hog prices declined by 11% in November compared to July. For 2000-2004, daily pork products increased 15% from July to November, but live hog prices declined by 20%.

As most people who read this weekly report know, the change in elasticity is probably associated with big double-shift plants that have limited flexibility without increasing costs.

We certainly are current with marketings. Average barrow and gilt weights for last week in Iowa-Minnesota were 4.3 pounds below a year earlier. The last time we had this big of an annual decline in weights was the week ending September 15, 1995.

Productivity growth appears to be declining. For example, for the five-year period ending August 31, 2004, the average annual productivity growth was 3.8%. For the five-year period ending March 31, 2006, the annual average productivity growth was 2.32%.

The June 1 Hogs and Pigs report will be released on June 30. We expect the total hog herd at 100.4%, breeding herd at 101.5%, and market herd at 100.3% of a year earlier.

If slaughter in the fourth quarter is close to expectations - current slaughter is below expectations, but not likely to stay that way for the remainder of the year - based on the March Hogs and Pigs, the decline in prices seasonally this fall will be larger than normal. In the last five years, the average monthly price from June to November has declined $9.11 per cwt.

Feeder pig prices at United Tel-O-Auction was mixed. Lighter weight pigs were $12.00-$15.00 per cwt lower this week than two weeks earlier, but heavier weight pigs were $10.00 per cwt higher than 14 days earlier.

Cold storage stocks of pork on May 31 were 9% below April 30 and 8% below May 31, 2005. Belly stocks at the end of May were 21% below a year earlier. Ham stocks increased 8% from the end of April to the end of May, but were 7% below a year earlier.

Cash top hog prices this Friday morning were same to a bit higher compared with a week earlier. Top prices were steady to $1.00 higher compared to a week earlier. These top live prices for selected markets were: Peoria $54.00 per cwt, St. Paul $58.00 per cwt, and interior Missouri $55.00 per cwt.

Weighted average carcass prices by area Friday morning were $1.41 to $3.15 per cwt higher compared to seven days earlier. Weighted average carcass prices by areas were: western Cornbelt $78.96 per cwt, eastern Cornbelt $77.72 per cwt, Iowa-Minnesota $79.18 per cwt, and nation $78.19 per cwt.

Hog slaughter this week under Federal Inspection was estimated at 1,827 thousand head, down 2.8% from a year earlier.

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