Hog Outlook: Pork Price Competitive Against Beef

3 September 2012, at 8:02am

US - Calculations by Shane Ellis at Iowa State University put the average cost of production for July slaughter hogs in Iowa at $66.92 per hundred pounds of live weight. That is up $1.80 from the month before, the highest month since last October, and the fifth highest month ever, write Ron Plain and Scott Brown.

Per head profit for hogs sold in July is calculated to be $16.11. Through July, profits have averaged $2.89 per head. Based on current futures market prices, hog cost of production is expected to reach $75/cwt of live weight ($1 per pound of carcass) this winter with losses exceeding $50 per head.

Preliminary data indicate federally inspected hog slaughter during August totaled 9.857 million, up 4.4% from last August’s record of 9.44 million. Weights are up, thus August pork production is also a new record for the month.

The Thursday afternoon calculated pork cutout value was $81.60/cwt, down $5.45 from the previous Thursday and $20.51 lower than a year ago. Loins, butts, hams and bellies were all lower this week. The end of BLT season is coming. Pork belly prices are down $28.89/cwt from three weeks ago.

Pork looks price competitive verses beef. The choice steer carcass cutout value for August 30 was 2.34 times the pork cutout value. A year ago it was 1.88 times pork cutout.

Hog prices are down for the fourth week in a row. The national average negotiated carcass price for direct delivered hogs on the morning report today was $71.13/cwt, down $8.73 from last Friday and down $19.21 from four weeks earlier. The eastern corn belt was down $8.88 from last Friday to $71.21/cwt and the western corn belt lost $9.03 this week to $70.68/cwt. Not enough hogs were sold early this morning in Iowa-Minnesota for a price quote. Peoria had a top live price this morning of $49/cwt and Zumbrota had a live top today of $50/cwt. The top for interior Missouri live hogs Friday was $54.25/cwt, down $4.25 from the previous Friday. Today’s average hog carcass price is 87.2% of the cutout value.

Hog slaughter this week totaled 2.282 million head, up 0.8% from the week before, up 6.8% compared to the same week last year, the largest for any week since mid December, and the largest ever for a week during August. Monday is the Labor Day holiday, so packers should find plenty of hogs available during the rest of the week.

The average barrow and gilt live weight in Iowa-Minnesota last week was 268.6 pounds, 0.9 pounds above a week earlier and up 5.1 pounds from a year ago. Weights are up for the fourth consecutive week. The is no indication that producers are selling hog lighter because of high feed costs.

Hog futures were higher this week. Friday's close for the October lean hog futures contract was $74.17/cwt, up $1.80 from the previous Friday. That is above the current cash price, so hopefully hog prices will stabilize soon. December hog futures settled at $72.40/cwt, up $1.83 for the week. February 2013 hogs ended the week at $80.32/cwt, up $1.80 from the week before.