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Pork Supplies Tighten; Prices Move Up

by 5m Editor
17 April 2010, at 5:42am

US - Pork supplies are tightening and prices are moving up, write Ron Plain and Glenn Grimes in their weekly Hog Outlook report.

Western corn belt cash hog carcass prices averaged $81.80/cwt this morning, the highest since August 2008. USDA’s Thursday afternoon calculated pork cutout value was $85.25/cwt, up $5.94 from the previous Thursday, up $12.97 from 3 weeks ago, and up $23.34 compared to the same day last year. Loins, hams and pork bellies were all more than $5 higher again this week. The current pork cutout is also the highest since August 2008.

John Lawrence at Iowa State University has long maintained an estimate of hog farm profitability. His numbers indicate that the typical farrow to finish operation turned a profit in March of $8.84/head. This was the first profitable month since August 2008. John estimates current breakeven at between $51/cwt and $52/cwt of live weight. Over the last two and half years, hog producers have lost more than $6 billion.

Both export demand and live hog demand are up, but domestic retail pork demand remains below year-ago levels. The average retail price of pork in March was $2.914 per pound, down 0.3 cents from February and 2.8 cents lower than in March 2009. March live hog prices averaged $52.43/cwt, up $3.45 from February and up $9.96 from March 2009. Margins for middlemen are being squeezed. The March farm-to-retail price spread for pork was the tightest since August 2008. Either retail pork prices move higher, or hog prices will be forced back down. Meat supplies are tight, so retail pork prices should move up. The question is whether the economy is strong enough to sustain higher grocery store prices.

The national weighted average carcass price for negotiated hogs Friday morning was $79.96/cwt, $6.27 higher than the previous Friday. Regional average prices on Friday morning were: eastern corn belt $76.72, western corn belt and Iowa-Minnesota both $81.80/cwt. The top hog price Friday at Sioux Falls was $55/cwt, up $2 from the previous Friday. Peoria and Zumbrota, MN both had a top price of $52 on Friday. The interior Missouri live top Friday was $52.75/cwt, $0.75 higher than the previous Friday.

This week’s hog slaughter totaled 2.032 million head, up 0.7 per cent from the week before, but down 4.3 per cent compared to the same week last year. Year-to-date pork production is down 5 per cent.

Following 9 weeks of being lower, the average carcass weight of barrows and gilts slaughtered the week ending 3 April, 201 pound, was unchanged from the same week of 2009. Iowa-Minnesota live weights last week averaged 270.2 pounds, up 0.3 pounds compared to a year earlier.

The May lean hog futures contract ended the week at $86.42/cwt, up $2.55 from the previous Friday. The June contract settled at $86.15, up $1.78 for the week. July closed the week $1.63 higher at $86.20/cwt and August ended the week $86.25/cwt. The May to August price range is unusually flat.

May corn futures gained 18.25 cents this week and settled at $3.64 on Friday. The July contract ended the week at $3.74, up 16.75 cents per bushel from the previous Friday.