A Profitable Summer for Hog Producers

US - Hog producers have been earning a profit this summer, so it is time to start worrying about herd expansion, writes Ron Plain in his weekly US Hog Outlook report.
calendar icon 4 September 2010
clock icon 4 minute read

History indicates that, on average, hog slaughter goes above year-ago levels five quarters after hogs return to profitability. For the current cycle, the second quarter of 2010 was the first quarter with solid profits which implies that the third quarter of 2011 should be the first quarter with hog slaughter above the year-earlier level.

There are two ways to increase the size of the breeding herd, add gilts faster or cull sows slower. It looks like producers are doing both.

Since the first of June, sow slaughter has been down a whopping 15.4 per cent compared to a year ago. Part of this drop can be explained by the fact that we had 3 per cent fewer sows on June 1 than a year ago. Part is due to fewer Canadian sows being imported for slaughter. The rest appears to be due to a desire to increase farrowings.

The gilt slaughter data collected by Glenn Grimes indicates a decline in the percent of gilts in barrow and gilt slaughter mix. This implies more gilts are being retained to add to the breeding herd. Look for USDA to tell us the September 1 breeding herd is larger than in June but still 1 per cent or so smaller than a year ago.

The pork cutout value declined a bit further from the $96.74/cwt record set on 24 August. Thursday afternoon's calculated pork cutout value was $92.38/cwt, down $1.35 from the previous Thursday. Loin and butt prices are lower this week while hams and bellies are higher. The pork cutout is $38.69/cwt higher than at this time last year.

The national weighted average carcass price for negotiated hogs Friday morning was $76.08/cwt, $3.28 lower than the previous Friday. Regional average prices on Friday morning were: eastern corn belt $75.73, western corn belt $77.39, and Iowa-Minnesota $76.77/cwt. The top live hog price Friday was $54/cwt at Zumbrota, MN and $53 at Peoria. The interior Missouri live top Friday was $55.75/cwt, 75 cents lower than the previous Friday.

This week's hog slaughter totaled 2.117 million head, up 0.3 per cent from the week before, but down 6.7 per cent compared to slaughter during the same week last year. Based on the market hog inventory in the June hogs and pigs report, slaughter this month should be down a bit over 5 per cent compare to last September.

The average carcass weight of barrows and gilts slaughtered the week ending August 21 was 197 pounds, the same as the week before and the same as a year earlier. Iowa-Minnesota live weight last week averaged 265.6 pounds, down 1 pound compared to a week earlier and 1.4 pounds lighter than the same week last year.

The October lean hog futures contract ended the week at $77.20/cwt, up $2.38 from the previous Friday. The December contract settled at $74.65 for the week. February closed the week at $77.62/cwt.

The unemployment rate increased slightly to 9.6 per cent in August. That is not good news for meat demand.

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