April 2012 Farm-to-Retail Hog Price Spread Wider

by 5m Editor
21 May 2012, at 6:37am

US - Problems with sovereign debt in Europe have caused both the Euro and stock markets to decline, writes Ron Plain.

The Dow Jones average is the lowest since mid January. The weaker Euro has meant a stronger dollar. The dollar index is the highest since mid January. A declining stock market is not good for domestic meat demand. A strong dollar is not good for meat exports.

USDA says 87 per cent of corn acres had been planted by 13 May. That compares to an average of 66 per cent planted on that date and 56 per cent planted on 13 May 2011. The Crop Progress report says 46 per cent of the soybean crop was planted by 13 May compared to an average of only 24 per cent on that date. Early planting correlates with above average yields.

Hog prices ended this week higher than the previous Friday.

The live price for 51-52 per cent lean hogs during April averaged $58.99/cwt. That was $2.87 lower than in March and $9.11 lower than April 2011. The average retail price of pork during April was $3.459 per pound. That was down 3.1 cents from March, but up 8.2 cents from April 2011. Normally, April prices are higher than March, so the decline this year is worrisome.

Obviously, with lower hog prices and higher retail prices the farm-to-retail price spread was much wider this April than last. All of the increase came at the retail level. Packer margins were 1.4 cents per retail pound smaller this April than in April 2011.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $79.84/cwt, up $5.42 from last Friday. The eastern corn belt averaged $78.57/cwt this morning. Both Iowa-Minnesota and the western corn belt reported a morning average of $82.98/cwt. Peoria had a top today of $56/cwt of live weight and Zumbrota a top of $55/cwt. The top for interior Missouri live hogs Friday was $56.50/cwt, up 75 cents from the previous Friday.

USDA's Thursday afternoon calculated cutout value was $82.68/cwt, up $2.56 from the previous Thursday and the highest cutout since 16 March. Loins, bellies, and butts were higher this week, hams lower. The negotiated hog carcass price this morning is 96.6 per cent of the pork cutout value. That is above the 92 per cent average.

Hog slaughter totaled 2.116 million head this week, up 1.3 per cent from the week before and up 4.2 per cent compared to the same week last year. This is the fourth consecutive week with hog slaughter well above the level expected based on the last hog inventory survey. Barrow and gilt carcass weights for the week ending 5 May averaged 206 pounds, unchanged from the week before but up two pounds from a year ago. The average barrow and gilt live weight in Iowa-Minnesota last week was 276.5 pounds, down 0.2 pounds from a week earlier, up 5.7 pounds from a year ago, and above a year earlier for the 25th consecutive week. Higher than expected slaughter, heavy carcass weights and soft demand has dampened the normal spring hog price rally.

Friday's close for the June lean hog futures contract was $87.42/cwt, up $2.12 from the previous Friday. The July lean hog futures contract settled at $88.57/cwt, up $3.42 for the week.