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Pork Commentary: Iowa–Southern Minnesota Lean Average

by 5m Editor
8 December 2010, at 5:06am

US - In this week's Pork Commentary, Jim Long writes about the Iowa – Southern Minnesota lean hog market.

Iowa – Southern Minnesota closed last Friday with an average lean average of $65.55 while the National 53 – 54 per cent leanCash USDA National Direct early weans and feeder pigs continue to gain strength. Last week cash early weans averaged $47.95 and 40 pound feeder pigs $57.26. These are strong prices when you consider the cash hog market is leading to $20 per head losses. The only way the prices jumped up to $5.00 per head higher last week is strong demand and restricted supply. With summer lean hog futures ranging from $87 - $89.50 it appears buyers don’t want to miss out! was $69.79. Considering the average lean hog is over 54 per cent the National Average is probably a good reflection of the market. The USDA pork cut – outs were 77.12 at the end of the week. Packers spread between the purchase price of hogs and the selling price of pork is still good but not as great as it was. With feed prices where they are we would estimate the average producer is losing about $20 per head farrow to finish. We believe that producers need 80 cents lean per pound with premiums for breakevens. February lean hog futures closed Friday at 76.575 cents per pound, with grade premiums February futures reflect an 80-cent per pound market. If futures reflect the future, it means mostly losing money until February at current costs.

Other Observations

There is no question hog weights are strong. The latest Iowa – Southern Minnesota is 275.16, a year ago 269.5. That 5.5 pound difference is adding more pork on the market and obviously pressuring prices lower. We expect weights will decline in the coming weeks. One thing we have noticed on our Genesus customer grade sheets as market weights have gone up is the ability to maintain strong lean meat percentages and grade premiums. Such a strong financial return and gross revenue per hog will in all likelihood encourage weights staying higher. The fact is some new modern genetics can stay lean at heavier weights and maintain good feed conversions.

Cash USDA National Direct early weans and feeder pigs continue to gain strength. Last week cash early weans averaged $47.95 and 40 pound feeder pigs $57.26. These are strong prices when you consider the cash hog market is leading to $20 per head losses. The only way the prices jumped up to $5.00 per head higher last week is strong demand and restricted supply. With summer lean hog futures ranging from $87 - $89.50 it appears buyers don’t want to miss out!

Cattle futures are showing strong optimism closing at $1.09 per pound, up over $100 per head in the last couple months. Higher cattle prices will help hog prices in the coming months.

Chicken suicide watch – After seeing several weeks of 6 – 7 per cent greater broiler egg sets. The latest data shows 2 per cent more egg sets. Is $5.00 corn finally sinking in?! We don’t need 14 million more chickens a week year over year as the chicken integrators were on pace for. As we said many times before last time $5.00 corn came along Pilgrim’s Pride the worlds largest chicken producer went broke. The hog industry has shown production restraint, the cattle industry the same hopefully, and the chicken industry manages to control their suicidal production impulse.

Corn Ethanol tax credits of 45 cents and tariffs of 54 cents are set to expire at the end of December. Full panic is setting in for the government free loaders in the ethanol industry. Consumer groups, environmentalists, former investor of climate change vice – president Gore, food companies, and of course livestock producers are lining up against these foolish subsidies that will cost the US treasury $7 billion a year plus the untold billions in higher food costs that in itself causes economic, social, and moral implications.

The reality driving up US food prices is a direct attack on the American Dream, American affluence, and the standard of living has been driven by agriculture productivity that allows US consumers to spend approximately 10 per cent of their disposal income on food. The 10 per cent is far less than any other country in the world. The 90 per cent remaining disposal income has driven the ability for American consumers to purchase homes, vehicles, educate their families, etc... Going forward higher spending on food caused by higher corn prices (ethanol) will delay the economic recovery as consumers have less disposal income for other items.

Now is your chance as a livestock producer to contact your congressman and senator to tell them what you think of Corn Ethanol. Lobbying works – calls from real people are very effective.