Hog Outlook: Most Hog Producers Still Profitable Despite High Supplies

US - Pork demand continues to remain at high enough levels to allow most hog producers to remain profitable despite much larger supplies this year. The farrow-finish profitability series maintained at Iowa State University pointed to September as the sixth consecutive month above breakeven, and the 19th out of the last 21, write Ron Plain and Scott Brown, Ag Economics, MU.
calendar icon 19 October 2015
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Though hog prices are down sharply from a year ago, so are input costs. Profitability levels will be challenged as we move into 2016 and the domestic meat supply continues to increase.

The retail pork price posted its fourth consecutive monthly increase in September, reaching $3.92 per pound. This is up 22 cents since June, but still remains 30 cents a pound below the September 2014 average.

Bacon prices continue to grow at the retail level, with the series from the Bureau of Labor Statistics having increased 79 cents per pound since May to $5.73 per pound. Boneless pork chops remain near the middle of the $4.20 to $4.60 per pound range that has existed for the past 18 months.

USDA's Foreign Agricultural Service released their biannual livestock world markets and trade circular last Friday. Despite sharply lower hog inventory noted in China after months of liquidation, annual pork production is projected to remain very near the 2014 level in both 2015 and 2016 due to heavier slaughter weights. The US industry will continue to monitor closely any developments in China, where more than half of the world's pork is produced and consumed.

Cash hog prices were down slightly for the week. Thursday's average negotiated carcass price for plant delivered hogs was $69.80/cwt, down $0.90 from last week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $68.78/cwt, down $1.04 for the week, and $29.40 lower than a year ago. The western corn belt price dropped $1.30/cwt. to $68.84/cwt. Iowa-Minnesota hogs sold at $68.97/cwt. this morning, and there was no quote for the eastern corn belt. Peoria had a top price today of $49/cwt, with interior Missouri live hogs at $48.25/cwt, both unchanged from last week.

The pork cutout gained a little ground this week, with this morning's cutout value at $89.24/cwt. FOB the plants, up 90 cents. Hams and butts declined on the week, with other parts of the cutout increasing in value, led by loins advancing 4.0%. This morning's national negotiated hog price equaled just 77.1% of the cutout value, down 2.0% vs. last week's level.

Hog slaughter for this week was 2.318 million head, up 1.2% from last week and 6.1% higher than the same week last year. The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 281.1 pounds, 0.8 pounds higher than the week before but 3.4 pounds below a year ago.

The December lean hog contract fell 66 cents for the week to end at $65.47/cwt. February hogs lost 60 cents, closing at $68.35.

December corn closed today at $3.77/bu, down 14 cents from last Friday.

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