Hog Outlook: Pork Industry Benefits from Higher Retail Prices

US Weekly Hog Outlook, 10th November 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.
calendar icon 10 November 2007
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Retail pork prices in September were down 0.9 percent from August but up 0.8 percent from September 2006.

Retail pork prices for the first nine months of 2007 were up 2.1 percent from 12 months earlier. The entire pork industry benefited from the higher retail prices. The processor-retailer margin was up 1.7 percent, packers' margin was up 1.9 percent and live hog prices were up 4.2 percent.

Slaughter continues very large with last week's slaughter, the fifth consecutive week, above 2.3 million head under Federal Inspection. This week slaughter is also expected to be above 2.3 million head.

So far prices are holding well with the record high slaughter levels but the pipelines are filling up. Apparently, cold storage space is limited.

If these slaughter levels continue, which is our expectation, prices may be pushed lower in coming weeks than indicated by the futures market and most observers' forecasts. Slaughter size from the first of October through this week is up about seven percent. Slaughter for the fourth quarter was forecast based on the September Hogs and Pigs report to be up 4.7 percent but about 1.1 percentage points of this increase was due to one more weekday slaughter in the fourth quarter this year than in 2006. With the adjustment for the extra slaughter day, slaughter on a daily or weekly basis was expected to be up 3.3 percent. So far the slaughter is more than double the expectations.

The good news is that the packers industry has handled these record high slaughter numbers with substantial less than record numbers on Saturdays.

However, we are not home free yet as the largest weekly slaughter for the year often comes following Thanksgiving. Therefore, a slaughter of about 2.37 million head is likely in December.

Pork product prices through Thursday this week were up compared to last week. The cutout on Thursday afternoon at $58.81 per cwt was $1.44 per cwt higher than last week. Loin prices were down $2.41 per cwt at $71.03 per cwt, Boston butts at $54.66 per cwt were down $1.87 per cwt, hams were up $9.58 per cwt at $52.81 per cwt and bellies at $71.44 per cwt were up $1.49 per cwt compared to seven days earlier.

Hog weights for barrows and gilts last week in Iowa-Minnesota jumped two pounds from a week earlier. The good news is these weights for the week ending November 3 at 269.7 pounds were up only 0.4 pound from a year earlier. Therefore, the odds are high that marketings are quite current. In fact, there is some possibility that marketings have been pulled fore word some in the last several weeks.

Cash live hog prices Friday morning were $1.50 to 3.75 per cwt lower compared to a week earlier. The weighted average negotiated carcass prices Friday morning were $2.48 to 4.31 per cwt lower compared to last Friday.

The live top prices Friday morning for select markets were: Peoria $30.00 per cwt, St. Paul $33.50 per cwt and interior Missouri $31.25 per cwt. The weighted average carcass prices for negotiated hogs by geographical area were: western Cornbelt $46.01 per cwt, eastern Cornbelt $45.20 per cwt, Iowa-Minnesota $46.04 per cwt, and nation $45.53 per cwt.

Slaughter this week under Federal Inspection was estimated 2362 thousand head, up 10 percent from a year earlier.

Feeder pig prices at United Tel-O-Auction this week were steady to $2.00 per cwt lower than two weeks earlier. The prices at United by weight groups were 50-60 pounds $53-68.50 per cwt and 60-70 pounds $52-55 per cwt.

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