Reduction in hog industry

US Weekly Hog Outlook, 20th January 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 20 January 2007
clock icon 4 minute read

The USDA final estimate for the 2006 corn crop was not good news for the hog industry. On Friday January 12, USDA released the January estimate of the 2006 corn crop and reduced the crop from 10.745 billion bushels from the previous estimate to 10.535 billion bushels. The market responded by a limit up or near limit up for all contracts on Friday in the futures market.

USDA increased their estimated price for the 2006-2007 crop marketing year by $0.10 per bushel to an average price of $3.20 per bushel.

For the period of 1908-1942 corn prices averaged $0.78 per bushel, from 1942-1972 the average corn price moved up to $1.26 per bushel and then from 1973-2005 another step up to $2.37 per bushel.

The odds appear high with the strong demand from the ethanol industry that corn prices are moving up to a new level. If the next price level is as much above the 1973-2005 level as the average percentage move up in the last two moves, we will be looking at corn prices a bit above $4.00 per bushel.

In the 70's when we had the last major move up in corn prices prior to the current indicated one, meat consumption declined for 3-4 years, then leveled off for about a short decade, then started climbing again.

USDA also reduced the 2006 soybean crop by 16 million bushels.

The high feed costs will be reflected in feeder pig prices by reducing the rice of a 40-pound pig by about $1.00 to $1.25 per cwt for each $0.10 per bushel increase in corn prices.

Remember for each $1.00 per bushel in corn price increase, with all other costs held constant, the cost of producing pork will be increased by $5-6 per cwt.

The weights of barrows and gilts in Iowa-Minnesota live declined by 1.2 pounds from the previous week and were 2.4 pounds below a year earlier last week. This was the sixteenth consecutive week for weights to be below a year earlier.

With the weather this year on average at least as good for hog finishing as a year earlier, the probabilities are high that the major reason for the lighter weights is high feed prices.

Cash live hog prices this Friday morning were $0.75-7.00 higher compared to 7 days earlier. The weighted average carcass price for the negotiated trade was up $1.37-4.63 compared to the previous Friday.

The top price for live hogs for select markets Friday morning were: Peoria $39.00 per cwt, St. Paul $43.00 per cwt, Sioux City was unavailable and interior Missouri $41.00 per cwt.

The cutout value per cwt of carcass Thursday afternoon at $64.15 per cwt was up $1.89 per cwt from a week earlier. Loin prices were up $4.54 per cwt at $79.11 per cwt, Boston butts at $74.46 per cwt were up $4.12 per cwt from 7 days earlier, ham prices were up $0.28 per cwt at $52.30 per cwt and bellies at $81.01 per cwt were down $0.08 per cwt from last week.

Slaughter this week under Federal Inspection was estimated at 2,073 thousand head, down 1.5% from 12 months earlier.

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