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Not a Very Good Week for Hog Producers

by 5m Editor
30 January 2010, at 7:04am

US - It was not a good week for hog producers as pork cutout and hog prices reversed their upward trend and dropped this week, write Ron Plain and Glenn Grimes in their weekly review of the US hog industry.

Loins, hams, bellies, and boston butts were all lower this week. The pork cutout ended 2009 at $67.39/cwt. By January 20, it had reached $78.63/cwt, the highest pork cutout since September 2, 2008. USDA’s Thursday afternoon calculated cutout value was $69.24/cwt, down $8.11 from the previous Thursday. At this time last year, the pork cutout was only $57/cwt. The 21 per cent year-over-year improvement in cutout value is not uniform across pork cuts. Wholesale prices of ribs are up 15 per cent and loins are up 9 per cent compared to 29 January 2009. Wholesale ham prices are up 58 per cent. As is often the case during a recession, lower cost cuts of meat do better than higher cost cuts.

Hog bids on a carcass basis were sharply lower this week. The national weighted average carcass price for negotiated hogs Friday morning was $62.23/cwt, $5.18 lower than the previous Friday, but $5.77/cwt higher than a year ago. Regional average prices on Friday morning were: eastern corn belt $62.28, western corn belt $61.57, and Iowa-Minnesota $61.77/cwt. The top hog price Friday at Sioux Falls was $45.50/cwt. Zumbrota, MN had a top of $42 and Peoria topped at $41/cwt. The interior Missouri top Friday was $46/cwt, the same as the previous Friday.

Perhaps the best news of the week was the government’s Friday announcement that the nation’s GDP grew by 5.7 per cent during the final quarter of 2009. Much of the growth was due to stopping the decline in inventories. Economic growth, if it continues, will eventually lead to lower unemployment levels and that should give us stronger meat demand. This year’s hog slaughter is expected to be 4-5 per cent lower than in 2008. Hog carcass prices averaged $63/cwt in 2008. If we get stronger meat demand, we could easily beat that this year. Pork supplies are declining, but better demand is needed to push hog prices back above breakeven.

This week’s hog slaughter is estimated to be 2.142 million head, down 4.8 per cent compared to the same week last year. Since 1 December, slaughter of US raised barrows and gilts has been roughly 2.4 per cent below the level implied by USDA’s December inventory survey. Part of this decline is undoubtedly due to bad weather.

The average carcass weight of barrows and gilts slaughtered the week ending 16 January was 201 pounds, 1 pound lighter than the same week last year. Iowa-Minnesota live weights last week averaged 269.9 pounds, up 0.9 pounds compared to a year earlier.

The February lean hog futures contract ended the week at $66.50/cwt, down $3.35 from last Friday. Today the April contract settled at $68.60, off $3.37 for the week. May closed the week at $73.65/cwt and June ended at $76.72/cwt.