Cash hog prices under pressure this week

US Weekly Hog Outlook, 10th March 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 10 March 2007
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The estimated costs and returns for different farm enterprises made at Iowa Stat University have been revised to represent more accurately modern conditions. For example, the old series for hogs assumed a 150 sow single-site operation. The new farrow-to-finish series represents a 1,200-head sow herd.

These changes have resulted in quite differing results for a farrow-to-finish hog operation and estimates of costs and returns.

John Lawrence at Iowa State, who is now the author of the series, has published information that has been very valuable to the hog industry as it showed short-run results to costs and returns changed.

The changes in assumptions have resulted in a dramatic change in returns. The average returns on the old series and assumptions for 2001-2006 were $9.22 per head profit. The average returns using the new series and assumptions are for $27.12 per head for these 6 years. This is a very impressive change and somewhat hard to believe.

There is no question in our mind that a 1,200-sow hog operation with modern facilities and technology is substantially more efficient and profitable. Otherwise, we probably would not have seen the drastic restructuring of the hog industry in the U.S. to the larger size units.

The new series shows a cost per cwt with $4.00 per bushel corn and $160 per ton soybean meal of $44.59 per cwt for farrow-to-finish hog operations.

If the new costs and returns series by Iowa State are the real world, it means the hog herd in the U.S. will not need to be downsized much, if any, in the next few years with a near stable demand for live hogs. The belief that the hog herd in the U.S. will not need to be downsized with a change in corn prices of about $2 per bushel for the last five years to a $3.50-4.00 per bushel cost in the next few years is almost, if not completely, unbelievable.

Some people believe John and his staff at Iowa State need to go back to the drawing board for the new series to provide information that will be the most useful to the industry.

Live barrow and gilt weights last week in Iowa-Minnesota continued below a year earlier for the twenty-third week. The weights at 268.2 pounds were down 0.4 pound from the previous week and down 1.7 pounds per head from a year earlier.

Cash hog prices came under pressure this week due to the record high slaughter levels brought about by the Midwest storm of last week.

Top cash prices this morning were $0.50-1.00 per cwt lower compared to last Friday. The weighted average negotiated carcass prices Friday morning were $2.05-3.16 per cwt lower compared to 7 days earlier.

The top live prices for select markets this Friday were: Peoria $40.00 per cwt and interior Missouri $42.50 per cwt. The weighted average negotiated carcass prices for Friday morning by area were: western Cornbelt $59.95 per cwt, eastern Cornbelt $57.74 per cwt, Iowa-Minnesota $59.81 per cwt and nation $58.86 per cwt.

Carcass cutout wholesale prices per cwt of carcass at $67.86 per cwt Thursday afternoon were up $0.44 per cwt from a week earlier.

Slaughter this week under Federal Inspection was estimated at 2,128 thousand head, up 13.9% from last week and up 5.9% from a year earlier.

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