Slaughter of US raised hogs since the end of November has been up 10.1 per cent compared to a year earlier, more than double the increase implied by the December hogs and pigs report. Thus far in 2008, hog slaughter has been up 11.7% compared to a year earlier. This week's hog slaughter was 2.227 million head, up "only" 4.9 per cent compared to the same week in 2007. March 2007 slaughter was relatively large, thus the string of double-digit increases in weekly hog slaughter is over, we hope.

With red ink during the last five months averaging close to $25 per slaughter hog, producers are earnestly looking for signs of herd reduction. Sow slaughter thus far in 2008 is up, but not by much. During the first 8 weeks of 2008, sow slaughter was up 3.4 per cent. We think the breeding herd is shrinking, but slowly.

This week ended with hog prices lower than seven days earlier. The top price Friday at Peoria was $32/cwt, $2.50 lower than the previous Friday. The interior Missouri top Friday was $38, down $0.75 for the week. The national weighted average carcass price Friday morning for negotiated hogs was $49.96/cwt, $6.08 lower than the previous Friday. Regional average prices on Friday morning were: eastern corn belt $49.62, western corn belt $50.72, and Iowa-Minnesota $51.18/cwt. Carcass prices are roughly $8/cwt lower than at this time last year.

The pork carcass cutout value was lower this week. The Thursday afternoon USDA calculated cutout value was $59.10/cwt, down $1.13/cwt from the previous Thursday. Pork loins were a bit higher, hams were steady, but bellies and Boston Butts were lower.

Retail Prices Holding

Given the huge supply, retail pork prices are doing very well. January pork prices at retail averaged $2.856 per pound, up 5.4 cents compared to 12 months earlier. Based on preliminary data, domestic pork demand in December and January was the strongest of any two consecutive months since the spring of 2002. Export demand for US pork is expected to be strong in 2008 due to a weak dollar and expected large purchases by China. Hopefully, high energy prices and a soft US economy won't disrupt the trend.

The average carcass weight of barrows and gilts slaughtered the week ending February 23 was 200 pounds, up 1 pound from the same week in 2007. The national weekly average carcass weight of barrows and gilts has been above year-ago levels every week since mid July. With hog prices in the low $50s and break evens close to $70/cwt, marketing the top end of hogs a bit sooner and lighter would appear to be a good way to cut losses and help reduce the amount of pork that has to be marketed.

The April lean hog futures contract ended the week at $57.85/cwt, down $2.10 from last Friday. The June contract settled at $74.10 today, down $2.25 for the week. August closed the week at $79.575/cwt and December settled at $76.175. The futures market continues to be optimistic about late 2008 and 2009. The February 2009 contract closed at $79.50, roughly $21/cwt above where the February 2008 contract expired.