Decline in hog operations

US Weekly Hog Outlook, 10th February 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 10 February 2007
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The demand for pork was down 4.5% for all of 2006, beef was down 4.4% and broilers were down 7.7% based on preliminary data.

For over 20 years, some people have speculated that the U.S. consumer had reached a maximum in meat consumption. Is it possible that we finally have or is it just another period like the 1980's?

For the first five years of the 1980's pork demand was down an average of 4%, beef was down 3.7%, broiler demand was down 1.2% annually and turkey demand was down 1.4% annually.

As shown above, we have had periods in the past when meat demand for all species have been down for some time; therefore, we doubt the probabilities are real high that the U.S. consumer has reached a maximum in meat consumption.

For the three months of October, November and December, the demand for pork was down only 0.8% from 12 months earlier and live hog demand for these 3 months was up 1.3% from a year earlier.

The number of hog operations in the U.S. continues to decline. The number of operations on December 1, 2006, was down 2.6% from the same date in 2005. All size operations having an inventory below 2,000-4,999 head declined from 2005.

The number of owners of hog operations also continued to decline with the December 1, 2006 number at 3.2% below 12 months earlier.

The odds appear very high that the concentration in the hog industry is not over.

The average live weight of barrows and gilts in Iowa-Minnesota for last week at 267 pounds was 2 pounds below a week earlier and 3.7 pounds below the same week in 2006. Last week was the nineteenth consecutive week for weights to be below a year earlier. The major reason for the lighter weights is corn prices, but cold weather probably was a major factor in the big decline last week from the previous week. We did not have a week with weights at 267 pounds or below until May of last year. We believe the odds are very high that hog producers have pulled marketings forward and marketings in coming weeks will likely be some below expectations.

Pork cutout per cwt of carcass this Thursday afternoon was up $7.24 per cwt from a week earlier at $70.32 per cwt. Loin prices at $86.62 per cwt were up $6.86 per cwt, Boston butts were up $6.83 per cwt at $77.99 per cwt, hams at $56.68 per cwt were up $5.92 per cwt and bellies were up $10.75 per cwt at $98.18 per cwt compared to a week earlier.

The prices of live hogs this Friday morning were $2.50 higher to $1.00 lower compared to 7 days earlier. The weighted average carcass price for negotiated hogs Friday morning was up $0.36-4.34 per cwt compared to a week earlier.

The top live prices Friday morning were: Peoria $41.00 per cwt, St. Paul $45.00 per cwt, Sioux Falls was unavailable and interior Missouri $45.50 per cwt. The weighted average carcass prices for negotiated trade Friday morning by area were: western Cornbelt $66.03 per cwt, eastern Cornbelt $63.16 per cwt, Iowa-Minnesota $66.73 per cwt and nation $65.00 per cwt.

Slaughter this week under Federal Inspection was estimated at 1,952 thousand head, down 3.4% from a year earlier.

John Morrell and Co. announced late Thursday that it will temporarily discontinue second-shift hog processing operations at its Sioux City, Iowa, facility effective February 19. This action will be negative to hog prices.

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