Hog Outlook: Some Surprises in October!

by 5m Editor
21 October 2007, at 5:32pm

US Weekly Hog Outlook, 19th October 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

There were some surprises in the October crop report. USDA increased the 2007 corn crop from 13.308 billion bushels in September to 13.318 in October. The increase was due to more harvested acres. The average 2007-corn yield per acre was reduced from 155.8 bushels estimate in September to 154.7 bushels per acre in October. The trade was expecting an increase in yield.

The current estimate is for corn ending stock in the 2007-2008 market year to 1.997 billion bushels. The ending stocks this year was 1,304 billion bushels.

USDA current estimates for corn price in the 2007-2008 market year is $2.90-3.50 per bushel or a mid point estimate of $3.20 per bushel up from $3.04 in the 2006-2007 market year. In our opinion, the average price for corn in this marketing year will be near USDA midpoint or higher otherwise corn will lose too many acres to soybeans in 2008.

USDA held the 2007 soybean yield at 41.4 bushels per acre in October the same as in September. However, average of soybeans was reduced to 62.8 million harvested in October from 63.3 million in September.

The 2007 soybean crop estimate in October is at 2.598 billion bushels - down 21 million bushels from the September estimate. Ending soybean stock for the 2007-2008 marketing year is estimated at 215 million bushels - down from 573 million bushels at the end of the 2006-2007 marketing year.

USDA estimate for soybean prices for the 2007-2008 marketing year is $7.85-8.85 per bushel - up $1.50-2.50 per bushel from the $6.43 per bushel price in 2006-2007 marketing year.

Good news last week when the foreign trade data for August was released, pork exports in July were up 11 percent in tonnage. Better news is that the value of pork exports in August were up 14.7 percent from 12 months earlier and pork export value for January-August was up 5.9 percent from the same months in 2006.

Pork exports for January-August were down only 1.3 percent from a year earlier. For January-July pork exports were down 2.8 percent. We now believe there is a realistic possibility for 2007 to be the 16th consecutive year with pork exports at record high levels.

The good news about exports also applies to pork variety meats (or by-products). August variety meat tonnage was up 5.5 percent in value and 13.5 percent in value relative to a year earlier.

By-products tonnage was down 0.7 percent for January-August but up 6.2 percent in value.

The higher value for pork exports and by-products value is no doubt a part of the reason for good growth in live hog demand for January-August. With the record slaughter in recent weeks, the strong live hog demand has continued into October. Also a part of the indicated strong demand in recent weeks has probably been the heavy featuring of pork by retail food stories. With the price of chicken coming down we are now concerned that some of the current strong demand could vanish during November and early December with the possibility of setting new weekly high for hog slaughter.

Pork product cutout gained a little again this week despite the large slaughter. The cutout for Thursday afternoon at $62.08 per cwt of carcass was up $0.61 per cwt from a week earlier.

Live hog prices Friday morning were steady to $1.00 lower compared to seven days earlier. The negotiated carcass weighted average prices Friday morning higher in the east and lower in the west compared to a week earlier.

The top live prices for select market Friday morning were: Peoria $35 per cwt, St Paul $38 per cwt and interior Missouri $39.50 per cwt. The negotiated weighted average carcass prices were: western Cornbelt $55.27 per cwt, eastern Cornbelt $54.61 per cwt, Iowa-Minnesota $55.43 per cwt and nation $54.78 per cwt.

Slaughter this week under Federal Inspection was estimated at 2334 thousand head, up 6 percent from a year earlier. The second largest weekly total ever.

5m Editor