Pork Commentary: Hog Prices Bounce Back as Hog Weights Drop

CANADA - The Iowa-Minnesota lean price bounced back over 70¢ last week, touching 74¢ Thursday before falling back to just under 72¢ Friday, writes Jim Long. US slaughter for the week was 1.952 million, the week before 1.934 and last year 1.958.
calendar icon 24 May 2007
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Lean Hog Futures for June, July and August continue to hover around 75¢. The US pork cut-out calculation last Thursday was 77.74. The spread from 72¢ to almost 78¢ gives lots of room for packers to bid prices to 75¢ lean in the coming week.

Iowa Minnesota Weights
Live Weights
May 12th 2007 265.9lbs
May 5th 2007 267.7lbs
May 12th 2006 268.9lbs

The Iowa-Minnesota weights tell us that hogs are 3 lbs lower than a year ago. Three lbs is probably 300,000 to 400,000 head pulled ahead. For going forward slaughter levels we call this bullish. You only kill them once. The pull-ahead is further confirmed by the 1.8 lb drop in weights in the last full week. Also, when we look at daily slaughter weights the last few days, it appears to us that weights continue to be dropping. The Lean Hog Price is driven by demand and the total tonnage of pork.

Tonnage is carcass weight times heads. A 3 lb difference in liveweight is about 2.3 lbs in carcass weight. At current slaughter levels about 4 million less pound of pork per week. About 75 trailer loads. Less pork is bullish for prices.

Grain Production

Our premise is the world’s grain production, due to the high price of US corn, is expanding far greater than US ethanol production. We were frustrated by the lack of information on the South America crops (Argentina and Brazil). Consequently, we went on Argentina (Spanish) and Brazilian (Portuguese) websites to search for more information. The following is some of what we found.

Argentina Corn Production
2005 14 Million Tonnes
2006 22 Million Tonnes
2007 Projected 30 Million Tonnes

Argentina doubles corn production in two years. The increase is about 650 million bushels

Brazil Corn Export
2005 1 Million Tonnes
2006 3.9 Million Tonnes
2007 Projected 8 Million Tonnes

Brazil’s projected corn exports have increased 7 million tonnes in two years, or about 300 million bushels. Corn in Brazil is currently about $3.50 US bushel, just the same as US interior prices.

The US corn prices is driving the world grain price and increasing production. The combination of Brazil and Argentina increases is about 1 billion more bushels of corn that will be put on the global market.

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