CME: Hog Carcass Weights Increase at Faster Pace

US - Our comments yesterday on the recent declines in hog prices and factors driving them elicited some comments and insights from our readers that we thought were right to the point and worth sharing with everyone, write Steve Meyer and Len Steiner.
calendar icon 21 October 2010
clock icon 3 minute read

One very significant factor that we did not mention in our report is the recent shift in hog carcass weights and the implications this has for overall pork supplies but also what it tells us about the current dynamic in the hog market. It is not unusual for hog weights to increase into the fall. This is partly due to the effect of cooler weather, new corn becoming available, etc. Recently, however, hog carcass weights have increased at a much faster pace than one would expect for this time of year and the rise appears to have caught producers and packers somewhat by surprise.

A number of readers pointed out that the corn currently being harvested and fed to pigs is dramatically better than the old corn that was going into feed rations prior to harvest. This appears to have significantly changed feed intake and led to an explosion in hog carcass weights. USDA publishes its actual hog carcass weight data with a two week lag. While we do get an estimate of hog carcass weights at the end of each week, that estimate can change and in recent weeks it has been revised up consistently. But as part of the Mandatory Price Reporting system (MPR), USDA does collect hog carcass weight data on a daily basis for hogs going to slaughter. That data tells the story of what’s taking place.

The table below summarizes hog carcass weights for the last three weeks and compares to year ago levels. As you can see, we have gone from hog carcass weights for around 202-203 pounds per carcass at the end of October to as high as 207 pounds per carcass currently (data is reported for prior day, the latest available being 18 October). The increase in weights likely has offset the year over year declines in hog slaughter and pork production is now likely running above year ago. The feed intake improvements and increase in weights has implications on the way producers market their hogs. Producers cannot allow weights to increase at current pace and, as one of our readers noted, are “fighting to get pigs scheduled as they cannot get ahead of weights.“ Which brings us back to the sharp drop in hog prices. Packers can clearly solve this by ramping up slaughter. They may have the capacity to do but for now are enjoying the improved margins and only slowly increasing production.

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