Hog Outlook: Pork Demand Picture is Mixed

22 October 2012, at 7:48am

US - The pork demand picture is mixed. Through August, 2012 domestic pork demand was down 1.3 per cent, export demand was up 3.3 per cent, and live hog demand was in between at down 0.2 per cent, write, Ron Plain and Scott Brown University of Missouri.

Given the weak economy, a decline in domestic demand is not a big surprise. Given the 1.5 per cent decline in the supply of competing meats, the 1.3 per cent decline in domestic pork demand is not encouraging either.

During September, the average retail price of pork in grocery stores was $3.507 per pound. That was 1.9 cents lower than in August and 5.4 cents lower than last September. The average price of slaughter hogs during September was $50.85/cwt, down $12.66 from August and down $14.60 compared to September 2011. The September price decline was driven in large part by increased supply. September daily pork production was 4.3 per cent higher than in September 2011.

This week, USDA’s Foreign Ag Service released their updated estimates of 2012 world pork production and trade. The US. has the third largest hog herd (after China and the E.U.); is the third largest producer of pork (after China and the E.U.); ranks seventh in pork imports (after Japan, Russia, China, Mexico, South Korea and Hong Kong); and ranks first in pork exports. USDA-FAS predicts the US. hog inventory, pork production, and pork imports will all decline in 2013. US. pork exports are expected to increase next year.

Hog prices held steady this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $81.52/cwt, up 6 cents from last Friday and up $17.97 from five weeks ago. The eastern corn belt averaged $80.31/cwt on the morning report today. The western corn belt averaged $83.55 and Iowa-Minnesota had a morning average negotiated price of $83.64/cwt. Peoria had a top live price this morning of $55/cwt. Zumbrota, MN topped at $57/cwt. The top for interior Missouri live hogs was $58.50/cwt, unchanged from the previous Friday.

The Thursday afternoon calculated pork cutout value was $87.79/cwt, up 10 cents from the previous Thursday, but $11.61 lower than a year ago. Loins and butts were lower this week while hams and bellies were higher.

Packer margins have tightened in the last two weeks. Today’s hog prices are 92.9 per cent of pork cutout value.

Hog slaughter this week totaled 2.388 million head, down 0.3 per cent from the week before, but up 3.3 per cent compared to the same week last year. The average barrow and gilt live weight in Iowa-Minnesota last week was 272.2 pounds, up 0.9 pound from a week earlier, but down 0.1 pound from a year ago. Four of the last five weeks, weights have been below year-ago.

Hog futures were higher this week. Friday's close for the December lean hog futures contract was $79.62/cwt, up $1.25 from the previous Friday. February hog futures ended the week $1.05 higher at $85.70. April hogs settled at $90.80/cwt, June at $100.82/cwt.