Hog Outlook: PEDV Impact Pushing Summer Hog Futures Contracts

US - Canada has announced its second case of the PED virus, also in Ontario. The US ended 2013 with PED on 2,000 farms and has added another 600 this month. The impact of the virus is pushing summer hog futures contracts close to record highs, write Ron Plain and Scott Brown.
calendar icon 3 February 2014
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The February lean hog futures contract settled at $86.22/cwt today, down 15 cents from the previous Friday. April hog futures ended the week at $94.80/cwt, up 78 cents from the week before. May hogs gained $2.15/cwt to close at $102.70. The June contract ended the week at $104.82/cwt. July closed at $103.400/cwt.

Word from Moscow suggests Russia plans to re-open their markets to US turkey in mid February and a few weeks later may lift their ban on US pork. Imports were stopped because the US uses ractopamine as a feed additive. In 2012, Russia was the sixth largest foreign destination for US pork exports.

Calculations by Shane Ellis at Iowa State University put the average cost of production for Iowa market hogs sold during December at $63.33/cwt of live weight. The breakeven price has declined each month since January 2013. December cash hog prices were lower than production costs resulting in an average loss of $4.02 per hog marketed.

For all of 2013, the average cost of production was a record $70.46/cwt of live weight. The ISU calculations show an average loss of $8.83 per hog sold last year. That was better than the $12.47/head loss estimated for 2012, but certainly not as good as the $4.92/head profit in 2011.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $79.99/cwt, up $2.13 from last Friday, but down $3.60 from a year ago. There were no hog price quotes for the eastern corn belt, western corn belt or Iowa-Minnesota this morning. Peoria and Zumbrota, MN both had a live price top this morning of $53/cwt. The top price Friday for interior Missouri live hogs was $55.75, up $1.50 from the previous Friday.

Friday morning's pork cutout value based on mandatory price reporting was $89.42/cwt FOB plants, up $2.89 from the week before and up $4.38 from a year ago. This morning's hog carcass price averaged 89.5 per cent of the cutout value.

Hog slaughter this week totaled 2.132 million head, down 4.1 per cent from the week before and down 1.7 per cent compared to the same week last year. Harsh winter weather in the eastern US impacted this week's slaughter.

The average live weight of barrows and gilts in Iowa-Minnesota last week was 282.9 pounds, down 0.8 pound from a week earlier, but up 7.8 pounds from a year ago. This weight series has been more than 6.0 pounds above year-ago for each of the last 13 weeks.

March corn futures ended the week at $4.34 per bushel, up 8 cents from the week before. June corn settled at $4.44/bushel.

March soybean meal futures ended the week at $426.10 per ton, up 40 cents from the previous Friday.

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