Hog Outlook: Are Contractors Satisfied with Contract Hog Production?

US Weekly Hog Outlook, 22nd September, 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 22 September 2007
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As indicated in last week's letter, contract production of hogs is a very important part of the U.S. hog industry. Both the contractor -- the person who owns the hogs, provides feed and health products and assumes all market risk -- and the grower -- the person who owns facilities, provides utilities and labor and gets paid a fee per hog space, per pound of growth, etc. -- are quite pleased with contract production.

Most of the negative opinions about contract production are by people who are not involved with a contract. See tables below.

How satisfied are contractors with contract hog production?
Firm Size
(thousand head mktd.)
Satisfaction Rating
1 = very dissatisfied
6 = very satisfied
2003 2006
1 - 50 4.43 4.24
50 - 500 4.44 4.23
500+ 4.84 4.84

How satisfied are growers with contract hog production?
Firm Size
(thousand head mktd.)
Satisfaction Rating
1 = very dissatisfied
6 = very satisfied
2000 2003 2006
1 - 50 4.6 4.9 4.6

Pork exports for July were 2.1 percent above a year earlier for the first time since January of 2007. For January-July, pork exports were down 2.8 percent from 12 months earlier, but the data says the dollar value of exports for the first seven months of 2007 was up 5 percent from a year earlier.

For January-July, pork exports to Japan were up 7.8 percent, to Canada up 2.9 percent, to Mexico down 30.5 percent, to Russia down 17.8 percent, to South Korea down 2 percent, to Mainland China and Hong Kong up 78.7 percent, to Taiwan down 37.7 percent, Caribbean down 31.1 percent and to other up 1 percent.

Both pork and beef exports to Mexico this year have been down substantially from a year earlier. There are several possibilities as to why the reductions in purchases of meat from the U.S. by Mexico. The high price of corn and its impact on other Mexican foods, downsizing of the Mexican hog herd which increased pork production in Mexico, and bad data as to the amount exported.

Pork imports for January-July were up 0.1 percent from last year. Net pork exports as a percent of production for the first seven months of 2007 at 9.19 percent were down from 9.83 percent for the same months of 2006.

Our current estimate of the September 1 Hogs and Pigs report is for the total herd to be up 2.1 percent, the breeding herd up 0.5 percent and the market herd to be up 2.3 percent from a year earlier.

The average live weight of barrows and gilts in Iowa-Minnesota for the week ending September 15 were up 1.3 pounds from a week earlier and a year earlier at 266.2 pounds -- the highest of record for this week.

Pork cutout values per cwt of carcass at $65.83 per cwt were down $1.63 per cwt on Thursday afternoon compared to a week earlier.

The odds appear high that hog prices will continue to be pushed lower seasonally into November.

Live hog prices this Friday morning were mixed at $1 per cwt lower to $2 per cwt higher compared to a week earlier. Negotiated carcass prices Friday morning were $0.88-1.11 lower compared to the previous Friday morning.

The top live prices Friday morning for select markets were: Peoria $39 per cwt, St. Paul $43 per cwt and interior Missouri $42 per cwt. The weighted average negotiated carcass prices by area Friday morning were: western Cornbelt $62.53 per cwt, eastern Cornbelt $58.49 per cwt, Iowa-Minnesota $62.71 per cwt and nation $60.60 per cwt.

Retail pork prices in August dropped back slightly from the record high prices in July but the decline was only 0.2 percent. Retail pork prices for January-August at $2.86 per pound were up 2.3 percent from 2006.

Slaughter this week under Federal Inspection was estimated at 2,242 thousand head, up 4.8 percent from last year.

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