Hog Outlook: Decline in Cutout Value

by 5m Editor
9 June 2007, at 7:10am

US Weekly Hog Outlook, 9th June 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

The week ended with hog prices mixed compared to seven days earlier. The top price Friday at Peoria was $45/cwt, off $2.50 from the previous Friday. St Paul was steady at $49 and Sioux Falls had a top price of $51.50/cwt. The interior Missouri top Friday was $49.75, down $0.75 for the week. The national weighted average carcass price Friday morning for negotiated hogs was $69.33/cwt, $0.44 higher than the previous Friday. Regional average prices on Friday morning were: eastern corn belt $70.83, western corn belt $68.82, and Iowa-Minnesota $68.85/cwt. Hog prices are roughly $1-3 lower than early June 2006.

Hog prices got no help from the cutout value which also dropped this week. The Thursday afternoon USDA calculated cutout value was $73.23/cwt, down $1.01 from the previous Thursday. Pork loins were sharply lower, Boston butts and pork bellies lost a bit and hams were higher. The weakness in product values has packers cutting back on hours and lowering hog bids.

This week's hog slaughter was 1.924 million head, up 1.4% compared to the same week in 2006. Year-to-date slaughter is up 1.9%.

The average carcass weight of barrows and gilts slaughtered the week ending May 26 was 198 pounds, up 1 pound from the same week in 2006. This is the first week with barrow and gilt carcass weights above the year-earlier level since the last week of September. With corn prices $1.50/bushel higher than year-ago, slaughter weights should remain relatively light, especially if we have a hot summer.

Since March 1, hog slaughter has averaged 3.5% higher than the same period last year. This is well above the 1.6% increase indicated by USDA's March inventory report. Imports of slaughter hogs from Canada were 8.6% higher than last spring. Thus, slaughter of U.S. raised hogs since March 1 is only up 3.3% compared to last year. Look for some upward revisions in the next hog inventory report. Weekly feeder pig imports during March-May were up 10.2% compared to the same period last year. As you might expect given the large number of hog imports, 2007 Canadian hog slaughter is down 2.5% compared to last year.

Sow slaughter through May was 2.96% higher than for the same weeks in 2006 and 4.63% higher than in January-May 2005. Part of this increase is due to a larger sow herd this year. Part is likely due to $3 plus corn. We expect the breeding herd inventory in USDA's June hogs and pigs report to be a fraction of 1% larger than June 2006. The number of litters farrowed this spring was forecast to be down 0.5%, so the June 1 market hog inventory should be fairly close to last year.

Hog death losses from circo virus continue to plague the industry. An adequate supply of vaccine could add a significant number to hog slaughter.

The June lean hog futures contract ended the week at $72.87/cwt, down $2.00 from last Friday. The July contract settled at $73.75 today, down $1.04 for the week. August closed the week at $73.37/cwt and October settled at $67.50.

5m Editor