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Weekly Review: Hog Prices Gained Strength This Week

by 5m Editor
4 February 2008, at 11:19am

US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

Demand for pork at the consumer level in 2007 was up 2.6 percent based on preliminary data. Live hog demand last year showed a strong growth of 3.6 percent from 2006. At least a portion of the stronger live hog demand than consumer demand for pork was due to larger pork exports and population growth.

All meats, with the exception of broilers, showed demand growth in 2007 from 2006. As indicated above, consumer demand for pork was up 2.6 percent, beef up 0.6 percent, turkey up 3.3 percent, but broilers demand was down 1.4 percent in 2007 from 2006.

Live hog demand in the U.S. has performed very well since 1985. In these 22 years, live hog demand is 26.1 percent stronger than in 1985. Again, the two factors responsible for most or all of this gain were pork export growth and population growth.

This growth in demand for live hogs fueled growth in the North American hog herd. Hog slaughter in 2007 was 29.2 percent above 1985.

The cold weather recently contributed to declining hog weights. For the week ending January 26, barrow and gilt weights in Iowa-Minnesota declined 1.7 pounds from a week earlier and down 0.4 pound from a year earlier. The average weight for the week ending January 26 was 260.6 pounds per head.

Gilt data for the last two weeks is at a level to get some reduction in the herd if it stays at these levels. We are hearing about some sow liquidation, but the sow slaughter data was below a year earlier in December until the week ending January 19. For this week, sow slaughter was up 10.4 percent after adjusting for herd size.

The futures market is offering the opportunity to forward price hogs in the upper 50's live for February 2009. In mid weeks, the February 2009 contract for lean hogs was 41 percent higher than the 2008 February contract. What do the people trading lean hogs know that we do not? To get that price, pork production will need to be down 8-13 percent or the same combination of production reduction and demand growth that adds up to 8-13 percent. Getting that much decline in the next 12 months seems highly unlikely, especially with the futures market offering this level of price protection or opportunity.

Pork product cutout rallied this week with the cutout Thursday afternoon at $69.80 per cwt of carcass up $4.94 per cwt from a week earlier. Loins at $73.14 per cwt were up $2.66 per cwt, Boston butts at $59.71 per cwt were up $5.10 per cwt, hams at $52.21 per cwt were up $10.11 per cwt and bellies at $78.21 per cwt were up $5.95 per cwt from a week earlier.

Hog prices gained strength this week with slaughter still relatively large. Top live prices Friday morning were up $2-4 pre cwt compared to a week earlier. Weighted average negotiated prices Friday morning were up $1.15-2.66 per cwt compared to seven days earlier.

The top live prices for Friday morning for select markets were: Peoria $32 per cwt, St. Paul $37 per cwt, and interior Missouri $37.25 per cwt. The weighted average negotiated carcass prices by area were: western Cornbelt $53.31 per cwt, eastern Cornbelt $52.90 per cwt, Iowa-Minnesota $53.38 per cwt and nation $53 per cwt.

Slaughter this week under Federal Inspection was estimated at 2,276 thousand head, up 11.1 percent from a year earlier.

Cash feeder pig prices this week at United Tel-O-Auction were steady with two weeks earlier. All of the pigs were in the 50-60 pound range and sold for $53.50-57 per cwt.

5m Editor