Hog prices slope downward

by 5m Editor
3 March 2007, at 6:57am

US Weekly Hog Outlook, 3rd March 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

March came in like a lion with a lot of ice, snow and wind for the upper Midwest. Hog slaughter was sharply curtained on Thursday and Friday of this week resulting in some uneven pricing. The week ended with hog prices steady to $2 lower than seven days earlier. The top price Friday at Peoria was $41/cwt. St Paul and Sioux Falls had no Friday price reports because of snow. The interior Missouri top was $43 on Friday, down $1 for the week. The national weighted average carcass price Friday morning for negotiated hogs was $61.08/cwt, $1.24 lower than the previous Friday. Regional average prices on Friday morning were: eastern corn belt $60.90, western corn belt $62.00, and Iowa-Minnesota $62.29/cwt. Hog prices are roughly $1 higher than at this time last year.

Hog prices got no help from the cutout value which also dropped this week. The Thursday afternoon USDA calculated cutout value was $67.42/cwt, down $1.98 from the previous Thursday. Pork loins and Boston Butts were sharply lower, bellies higher and hams steady.

The early week trade forecast was that this week's hog slaughter would be up 2% compared to the same week last year. However, snow held the week's total to only 1.896 million hogs, down 4.4% compared to the same week in 2006. Look for some big runs, and lower prices, early next week as packers catch up on the backlog of market ready hogs.

Mild weather in late February increased hog movement and put hog prices on a downward path. The average live weight of barrows and gilts in Iowa-Southern Minnesota for the week ending February 24 was 268.6 pounds, up 1.4 pounds from the week before but still 0.9 pounds lighter than the same week in 2006. With corn nearly double year-ago prices, slaughter weights should remain below those of last year.

Since December 1, hog slaughter has averaged 0.6% higher than the same period last year. This is slightly below the 1.1% increase indicated by the December inventory report. Imports of slaughter hogs from Canada have been 8% higher than last winter. Thus, slaughter of U.S. raised hogs since December 1 is only up 0.4% compared to last year. Feeder pig imports during December-February were up 5% compared to the same months last year.

Sow slaughter this winter was 5% higher than a year ago. Given this and $4 corn, it appears likely that the sow herd is slowly shrinking. We expect the breeding herd inventory in USDA's March hogs and pigs report to be close to even with March 2006. The number of litters farrowed this winter was forecast to be up 2.2%, so the March 1 market hog inventory should be higher than last year.

The April lean hog futures contract ended the week at $66.35/cwt, down $0.40 from last Friday. The June contract settled at $76.90 today, up 50 cents for the week. August closed the week at $76.37/cwt and October settled at $69.35.

5m Editor