High Corn Prices To Raise Hog Production Cost

US Weekly Hog Outlook, 16th September 2006 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 16 September 2006
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Ron Plain
Ron Plain

The USDA September estimate of the 2006 corn crop for the U.S. is the second largest of record, if it comes true, at 11.114 billion bushels. This year total production of corn is expected to be exceeded only by the 2004 crop which amounted to 11.807 billion bushels. The 2006 yield estimate at 154.7 bushels per acre would also be the second largest of record. The highest yield per acre of record was also in 2004 at 160.4 bushels per acre.

Even with the larger crop estimate, USDA's estimate of carryover stocks of corn was reduced by 12 million bushels due to exports expected to be up 100 million bushels from both the August estimate and the 2005-2006 market year.

The ending stocks of corn for the 2006-2007 market year are expected to be reduced to 1.220 billion bushels from 2.012 billion bushels at the end of the 2005-2006 market year and down from the 2004-2005 market year ending stocks of 2.114 billion bushels.

With the reduced stocks, corn prices per bushel for the 2006-2007 market year is $2.35 per bushel for the mid-point estimate. This would be a $0.36 per bushel increase from the market year of 2005-2006. This much of an increase in corn price will increase the cost of producing hogs by $1.75-2.00 per cwt. However, if we can maintain most of the live hog demand of the summer of 2006, hog production for the next 12 months will likely be profitable for the average cost producer.

These higher corn prices will likely reduce feeder pig prices by $3-4 per head.

Also good news for hog producers is the USDA September estimate for the 2006 soybean crop is also the second largest crop of record. This crop, if the estimate comes true, it would be up slightly from the 2005 crop but down 31 million bushels from the record 2004 crop of 3.124 billion bushels.

This large soybean crop is expected to increase carryover stocks by 45 million bushels from the end of the 2005-2006 market year and 274 million bushels above the ending stock of the 2004-2005 market year.

With this larger carryover stock, prices are expected to be a little lower for beans this coming crop market year.

The estimate for soybean meal prices for the 2006-2007 market year is a mid-point estimate of $162.50 per ton --- down about $10.00 per ton from the 2005-2006 market year.

Top live hog prices this Friday morning were $0.50 higher to $3.00 lower per cwt compared to a week earlier. Weighted average negotiated carcass prices at the end of this week were up $0.56-2.41 per cwt compared to a week earlier.

The top live prices Friday morning for select markets were: Peoria $45.00 per cwt, St. Paul $48.00 per cwt, Sioux Falls $47.00 per cwt and interior Missouri $48.75 per cwt. The weighted average negotiated carcass prices Friday morning by geographic are were: western Cornbelt $67.99 per cwt, eastern Cornbelt $68.35 per cwt, Iowa-Minnesota $68.35 per cwt and nation $67.46 per cwt.

Pork cutout value per cwt of carcass Thursday afternoon at $72.41 per cwt was down $2.35 per cwt from a week earlier. Product prices have held quite well with the slaughter levels of recent weeks.

Pork exports for July of 2006 were 4.1 percent below a year earlier the first year-to-year decrease since August of 2003. However, for the first 7 months of 2006 pork exports are still up 12.4 percent from a year earlier.

The average weight of barrows and gilts last week in Iowa-Minnesota increased by 2.6 pounds from a week earlier to 264.2 pound average and up 2.1 pounds from a year earlier. We get this kind of an increase in weekly weights about every fall when we get cooler weather. However, the last 2 years, 2004 and 2005, the big increase has occurred in October.

Slaughter this week under Federal Inspection was estimated at 2123 thousand head, up 4.9 percent from 12 months earlier.

The number of pigs this week at United Tel-O-Auction was relatively small and prices held fairly well but steady to about $5.00 per cwt below 2 weeks earlier. The prices by weight groups were: 40-50# $85.00 per cwt and 50-60# $78.50-86.50 per cwt.

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