CME: Talk of Heavy Hogs Weighing on Supplies

US - While much of the focus in the marketplace is usually on the number of animals coming to market, reduced slaughter often equating reduced output, it is also important to keep an eye on the pounds those animals bring with them, according to CME's Daily Livestock Report for 6 May 2009.
calendar icon 7 May 2009
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Often, reductions in slaughter may be offset by higher weights and vice versa. Carcass weight performance also has the added benefit of providing an indication as to whether producers are falling behind in their marketings. As producers try to avoid selling in a down market, always hoping for better prices tomorrow, animals continue to consume feed, putting on the pounds and eventually boosting production.

US hog producers may find themselves in that predicament. Lean hog cash prices have plummeted in the wake of the H1N1 influenza outbreak, presenting producers with the bitter reality that animals they thought might bring a small profit this spring now represent significant losses. Will there be a quick turnaround in hog values? If so, how quick and when will it show up in the price sheets? So far, we have yet to see the effects of a slowdown in marketings reflected broadly in hog carcass weight data... but it’s early.

There is some talk in the market that heavy hogs will weigh on supplies this spring and those holding that opinion may yet be proved right. Through last week, however, hog weights were steady but higher year over year. Be careful when comparing only to last year, as comparisons to 2008 will be somewhat skewed by what happened at that time.

Last May, hog demand was supercharged by exports to China, causing producers to market hogs as soon as they could and leading to a larger than expected decline in hog weights. Current hog weights (week ending 2 May) are running some 3 pounds or 1.4 per cent over year ago levels but only slightly higher than where they were in 2007.

It is likely we will see weights remain high for the next few weeks as the market works through some of the reported backlogs. How long that continues is hard to know at this time but keep an eye on weights to gauge where the pork industry is in that regard. As for fed cattle weights, they have declined dramatically in recent weeks. Seasonally weights decline at this time of year. Also, it appears that many of the imbalances created last fall have for the most part been resolved and we should see fed cattle weights trend more closely with year ago values going forward.

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