Hog Outlook: June First Profitable Month Since July 2012

US - Iowa State University calculations on hog income and expenses indicate the average hog marketed in June turned a profit of $10.92 making June the first profitable month since July 2012, write Ron Plain and Scott Brown.
calendar icon 5 August 2013
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The estimated cost of production, $72.06 per hundred pounds of live weight, was lower for the fifth consecutive month. During the ten month period from August 2012 through May 2013, calculations by Shane Ellis at ISU indicate an average loss of $31.08 per hog sold. Extrapolated to the US hog industry, that totals to a loss of $3 billion.

Crop growing conditions continue to be far better than last year. As of 28 July, 63 per cent of corn acres were rated in good or excellent condition. That is unchanged from the week before, but up 39 points from a year ago.

The expectation of a big harvest is pushing down feed prices. Cash corn prices in Omaha were $5.72 per bushel at the start of August, down $1.25 from two weeks earlier. The September corn contract ended the week at $4.76/bushel, down 16 cents from the previous Friday. December corn settled at $4.6375, off 12 cents for the week. September soybean meal futures ended the week at $385.20/ton, down $18.80 for the week. December meal settled at $354.20/ton.

This week's economic news was not encouraging for domestic meat demand. The US economy grew by 1.1 per cent in the first quarter of 2013 and 1.7 per cent in the second quarter. Growth rates above 2 per cent are needed. During July, 162,000 jobs were added nationally. The long term trend in job growth is 230,000 per month.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $93.37/cwt, up $1.68 from last Friday. The eastern corn belt averaged $91.79/cwt this morning. The western corn belt and Iowa-Minnesota both had a morning average of $98.69/cwt. Peoria had a top live price this morning of $65/cwt. Zumbrota, MN topped out at $67.50/cwt. The top for interior Missouri live hogs Friday was $69/cwt, unchanged from the previous Friday.

Friday morning's pork cutout value based on mandatory price reporting was $103.67/cwt FOB plants, up $4.79 from the week before and up $10.89 from a year ago. Loin, butt and belly prices were higher this week; hams were lower. The average hog carcass price is 90.1 per cent of the calculated pork cutout value.

Hog slaughter this week totaled 2.022 million head, up 1.7 per cent from the week before, but down 0.9 per cent compared to the same week last year. The average barrow and gilt live weight in Iowa-Minnesota last week was 270.4 pounds, down 0.7 pound from a week earlier, but up 4.9 pounds from a year ago.

The August lean hog futures contract closed at $99.25/cwt today, up $1.48 from the previous Friday. October hog futures ended the week at $83.95/cwt, down 85 cents from the week before. December hogs closed the week at $80.80/cwt.

Hog and corn futures imply the coming 14 months will be profitable ones for the average hog producer.

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