Potential for modest profit for last half of 2006

US Weekly Hog Outlook, 11th August 2006 - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.
calendar icon 12 August 2006
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Ron Plain
Ron Plain

The American Agricultural Economics Association (AAEA) annual outlook survey for the remainder of 2006 and 2007 for livestock and the market year of 2006-2007 for corn and soybeans shows the potential for modest profit for hogs for the last half of 2006. For 2007, the estimates of all of the participants shows an average price for 51-52 percent lean U.S. basis of $43.30 per cwt. The participants who had major responsibility for hogs were less optimistic. The average price for 2007 for this group was estimated to be $41.58 per cwt live.

For the total group of economists, their estimate of corn prices for the 2006-2007 market year was $2.48 per bushel. Again, the economists with major responsibility for forecasting corn prices came in with a lower estimate at $2.43 per bushel.

These estimates indicate that the average producer in 2007 will have about a break-even year if the higher estimate is the most accurate but some losses if the lower estimate of $41.58 is the most accurate.

Corn prices for the past year have averaged near $2.00 per bushel U.S. farm basis. Corn at $2.48 per bushel will add about $2.50 per cwt to the average cost of producing hogs compared to the last 12 months. Soybean meal prices for the next year are estimated to average about the same to $5-10 per ton less than the average for the last year.

Hog weights continued to decline during the week ending August 5. The average live weight of barrows and gilts in Iowa-Minnesota declined 0.8 pounds per head during the week but were still 1.2 pounds above a year earlier. This was the fourth consecutive week with lower weights. For the week of August 5, weights per head were 3.6 pounds below the week ending July 9.

Live hog prices at the end of the week were $0.75 lower to $1.00 per cwt higher compared to a week earlier. Weighted average carcass base price for negotiated priced hogs were down $0.76 to up $3.97 per cwt compared to seven days earlier.

The top live prices Friday morning were: Peoria $47.00 per cwt, St. Paul $50.00 per cwt, and interior Missouri $48.25 per cwt. The weighted average negotiated carcass prices by area Friday morning were: western Cornbelt $71.01 per cwt, eastern Cornbelt $66.29, Iowa-Minnesota $71.60 per cwt, and nation $69.35 per cwt.

The August 1 USDA estimate of the 2006 corn crop at 10.976 billion bushels was 0.136 billion bushels below a year earlier. The August 1 estimate of this year's soybean crop at 2.928 billion bushels was down 0.159 billion bushels from the 2005 crop.

The August crop estimate for corn has a record of underestimating the actual crop in recent years.

USDA estimate of the average corn price for the 2006-2007 market year is a midpoint of $2.35 per bushel up $0.36 per bushel from the year earlier crop.

USDA estimate of soybean meal prices for the coming market year is a midpoint of $170.00 per ton, down $5.00 per ton from last year.

Hog slaughter this year under Federal Inspection was estimated at 1888 thousand head, down 1.2 percent from a year earlier.

Pork exports through June continue to run well above a year earlier. June 2006 pork exports were 15.7 percent above 12 months earlier and Japan was above a year earlier in June for the first month this year. For January-June 2006, exports were up 15.2 percent from 2005.

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