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Weekly Review: Hog Outlook

by 5m Editor
11 January 2010, at 7:58am

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

We can now look back on 2009, a year well worth forgetting. John Lawrence's calculations at Iowa State University indicate the average market hog was sold for a loss of $26.04 per head last year. Only 1998, with an average loss of $26.88 per head, was worse. John estimates cost of production for barrows and gilts last year at $52.44 per cwt live or roughly $70 per cwt on a carcass basis. Only 2008, with a live cost of $57.05 per cwt, was higher. By Dr Lawrence's estimates, hog producers have lost money in 25 of the last 27 months for a total loss of over $6 billion in equity. Based on current futures market prices, it looks like April will be the first profitable month for the average producer.

The February lean hog futures contract ended the week at $67.25 per cwt, up $1.65 from last Friday. The April contract settled at $71.42 today (8 December), up $1.55 for the week. May closed the week at $75.95 per cwt and June settled at $79.47 per cwt.

The weather was the big market mover this week. Lots of snow and bitter cold slowed hog movement and pushed prices higher. This week's hog slaughter is estimated by USDA to be 2.081 million head, down 12.9 per cent compared to the same week in 2009. Warmer weather next week should allow more hog movement, but weights are likely to remain below year-ago because of slow growth due to the cold.

The average carcass weight of barrows and gilts slaughtered the week ending 26 December was 198 pounds, two pounds lighter than for the same week in 2008. Weekly average carcass weights were below year-earlier levels only three times in 2009. Iowa-Minnesota live weights last week averaged 268.3 pounds, down 1.1 pounds compared to the same week last year.

We are on a good run of price increases. The low price month in 2009 was August. Prices have increased each month since then. December carcass prices averaged $61.17 per cwt in Iowa-Minnesota, the highest monthly price in 2009. The top live price for barrows and gilts Friday at Zumbrota, Minnesota, was $40 per cwt. Peoria had a top of $42 per cwt and Sioux Falls topped at $46, $3 higher than the previous Friday. The interior Missouri top Friday was $46 per cwt, up $2.75 for the week. The national weighted average carcass price Friday morning for negotiated hogs was $64.37 per cwt, $3.52 higher than the previous Friday and $9.07 per cwt higher than a year ago. Regional average prices on Friday morning were: eastern corn belt $64.12, western corn belt $65.45, and Iowa-Minnesota also $65.45 per cwt.

USDA's Thursday afternoon calculated pork cutout value was $70.32 per cwt, up $3 from the previous Thursday. Hams and bellies were higher than the week before while loins and Boston Butts were slightly lower. At this time last year, the pork cutout was only $59.32 per cwt.

Import and export data for November will be released next week.