Hog Outlook: June Hog Inventory Close to Trade Forecasts

US - Most of the numbers in USDA's June hog inventory report were close to trade forecasts, except for the number of sows farrowed and the number of pigs per litter this spring, write Ron Plain and Scott Brown.
calendar icon 8 July 2013
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March-May pigs per litter were a record 10.31 head, up 2.2 per cent from a year ago. The trade expected up 1.0 per cent. There were 2.0 per cent fewer litters farrowed this spring than last. The trade expected March-May farrowings to be down 0.9 per cent. These two "misses" offset each other. The spring pig crop was up 0.1 per cent which was what the trade predicted. At 30.111 million head, the spring pig crop is the largest ever. This is likely to translate into the largest fourth quarter hog slaughter ever, by my calculation up 0.3 per cent from the record set last year.

USDA said the market hog inventory was down 0.1 per cent on 1 June. That should keep slaughter close to year-ago levels and prices in the $90 for several more weeks. Since June 1, barrow and gilt slaughter has been up 0.9 per cent, the same as implied by the inventory of heavy market hogs.

Farrowing intentions for June-August are down 0.1 per cent and fall farrowing intentions are up 1.0 per cent. I expect this year's average price for barrows and gilts to be close to $85/cwt of carcass. That is higher than last year, but below the 2011 record.

As of 30 June, 67 per cent of corn acres were rated in good or excellent condition. That is up two percentage points from the week before and up 19 points from a year ago. Corn prices are expected to plummet as we approach harvest. The July corn futures contract ended this week at $6.85/bushel. The September contract ended the week at $5.26 and December corn settled at $4.91. September soybean meal futures ended the week at $386.70/ton. That is $102.40 lower than the July contract.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $97.24/cwt, down 5 cents from last Friday. The eastern corn belt averaged $97.03/cwt this morning. Neither the western corn belt nor Iowa-Minnesota had enough early sales for a morning price quote. Peoria had a top live price this morning of $67/cwt. The top for interior Missouri live hogs Friday was $70.50/cwt, down $1.50 from the previous Friday.

Friday morning's pork cutout value based on mandatory price reporting was $107.55/cwt FOB plants, down $3.73 from the week before, but up $16.91 from a year ago. The average hog carcass price is 90.4 per cent of the calculated pork cutout value.

Hog slaughter this week totaled 1.795 million head, down 11.0 per cent from the week before (due to the Independence Day holiday) but up 2.9 per cent compared to the same week last year. The average barrow and gilt live weight in Iowa-Minnesota last week was 273.4 pounds, down 0.6 pound from a week earlier, but up 3.4 pounds from a year ago.

The July lean hog futures contract closed at $102.35/cwt today, up $1.08 from the previous Friday. August hog futures ended the week at $97.75/cwt, up 30 cents from the week before.

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