Corn Prices Likely To Keep Rising

US Weekly Hog Outlook, 8th December 2006 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 9 December 2006
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Ron Plain
Ron Plain

The average weight of live barrows and gilts in Iowa and Minnesota for last week at 269.9 pounds was down 0.6 pound from a week earlier and down 1.3 pounds from a year earlier. The lighter weights are no doubt due to the higher feed prices. In the 2 weeks ending December 2, average live barrow and gilts weights in Iowa Minnesota are down an average of 1.15 pounds per head.

There is a probability that hog producers at least in the Midwest have pulled marketings forward some. Even a half-day slaughter pulled forward is a pretty impressive number. If so, it means hog slaughter is closer to expectations based on the September Hogs and Pigs Report than the data available indicated.

Feeder pig prices at United Tel-O-Auction this week were basically steady with two weeks earlier. However, compared to 12 months earlier feeder pigs at United are about $40 per cwt below 12 months earlier. The prices at United this week by weight groups were: 50-60 pounds $85-95 per cwt and 60-70 pounds $81 per cwt.

At this time last year December '05 corn futures were near $1.90 per bushel. The close for December '06 corn futures at the close Thursday December 7, December 06 corn was $3.56 per bushel. This is an increase of $1.66 per bushel. Our thumb rule is that for each $0.10 per bushel increase in corn prices it reduces the price of 40-50 pounds pigs by $2.00 to 2.50 per cwt.

The strong corn prices are likely to continue for quite some time. Iowa State University has done some work that indicates ethanol producers can afford to pay $4 per bushel plus a little change with the current government incentives and $60 per barrel of oil. Also, any kind of a short corn crop and we will have $5-6 per bushel corn for some time period.

Pork product prices per cwt of carcass Thursday afternoon was down $0.21 per cwt from a week earlier at $65.35 per cwt. Loin prices at $80.07 per cwt were up $2.77 per cwt, Boston butts were up $0.18 per cwt at $74.85 per cwt, ham prices at $57.56 per cwt were down $1.12 per cwt and bellie prices were up $1.02 per cwt at $78.60 per cwt or Thursday afternoon.

Gilt and sow slaughter continues to run above a year earlier and normal. The last five week data available for both sow and gilt slaughter levels have resulted in reducing the breeding herd in the past if it continued for a substantial number of weeks.

We do not know who is reducing but certainly hope it is occurring. In 2003, 80% of the hog producers who produce annually less than 50,000 hogs also raised corn. It certainly is possible that some of these older corn and hog producers have decided that with a high probability that corn prices are going to continue relatively high they can make an acceptable living without hogs.

Slaughter this week under Federal Inspection was estimated at 2,107 thousand head, down 0.6% from a year earlier.

Weighted negotiated carcass prices were $1.85 to $2.66 per cwt higher this Friday morning than a week earlier. These carcass weighted average prices by area were: western Cornbelt $61.33 per cwt, eastern Cornbelt $60.53 per cwt, Iowa-Minnesota $61.71 per cwt and Nation $60.98 per cwt.

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