Prices rally as packers chase hogs

US Weekly Hog Outlook, 9th June 2006 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 10 June 2006
clock icon 4 minute read
Ron Plain
Ron Plain

Hog prices rallied quickly this week as packers found it hard to buy enough hogs to meet their planned kill schedules. The week ended with prices $5-6 higher than seven days earlier. The top price Friday at St Paul was $55/cwt. Peoria's top was $49. Interior Missouri hogs topped out at $52 on Friday, up $5.75 for the week. The national weighted average carcass price Friday morning for negotiated hogs was $70.75/cwt, $5.27 higher than the previous Friday. Regional average prices on Friday morning were: eastern corn belt $68.83, western corn belt $73.05, and Iowa-Minnesota $73.43/cwt.

Just when people were beginning to think the high for 2006 was behind us, this week's rally pushed prices to the highest level since last August and above year-ago levels for the first time this year. Hog prices are roughly $6 higher than at this time last year.

One big reason for this week's run up in prices is the recent drop in hog weights. Late May slaughter weights were below year-ago levels for the first time since September. The lighter weights reflect both a slow down in growth rates due to rising temperatures and the fact that producers are very current in their marketings. That is the reason that packers' higher bids this week failed to bring more hogs to market.

Packer margins got some relief from the big jump in cash hog prices by an increase in carcass cutout value. The Thursday afternoon USDA calculated cutout value was $73.50/cwt, up $4.27 from the previous Friday. Look for packers to cut back on their kill schedules next week in an effort to restore their margins.

This week's hog slaughter is estimated by USDA at 1.903 million hogs, down 0.3% compared to this week in 2005. Since March 1, hog slaughter has averaged 1% higher than the same period last year. This is slightly above the 0.3% increase indicated by the March inventory report.

A slowdown in imports of hogs from Canada may be contributing to the price rally. Weekly trade data indicate March and April slaughter hog imports were up 10% but late May imports were below year-ago levels. Imports of feeder pigs from Canada have been consistently above year-ago levels since November. This would imply that imports of slaughter hogs from Canada this summer may remain relatively light. Statistics Canada says the Canadian swine breeding herd was slightly smaller than a year earlier in both their January and April inventory surveys.

The June lean hog futures contract ended the week at $72.95/cwt, up $3.55 cents from last Friday. The July contract settled at $70.70 today, up $1.80 for the week. August closed the week at $69.47/cwt and October settled at $58.49.

May was the 28th consecutive profitable month for hog producers. Look for the breeding herd to be up 1-2% in USDA's next quarterly inventory survey, which will be released at the end of this month.

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