Hog Outlook: Low Feed Costs Expected this Year

US - Feed costs this year may be the lowest since 2007 if USDA's planting intentions report turns out to be right and, of course, we have a good growing season, write Ron Plain and Scott Brown, Ag Economics, MU.
calendar icon 4 April 2016
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The March Prospective Plantings report surprised the market with a prediction of 93.601 million acres of corn, up 6.4 per cent from last year, up 4.0 per cent from the pre-release trade forecast, and the most corn acres since 2013.

The May corn futures contract settled at $3.54 per bushel today. That is down 16 cents from last week. December corn ended the week at $3.6975/bu.

Another big surprise in the Prospective Plantings report was wheat acres. At 49.559 million, it was down 9.3 per cent from last year, down 4.1 per cent from the trade forecast, and the fewest wheat acres planted in the U.S. since 1970.

USDA's March plantings survey indicates soybean acreage will total 82.236 million. That is 0.5 per cent less than last year and 1 per cent less than the average trade forecast.

The Labor Department reports that the U.S. economy added 215,000 jobs to payrolls in March. The average hourly earnings increased 7 cents from February. Both are good news for meat demand.

Cash hog prices were steady this week. The national negotiated barrow and gilt price averaged $60.94/cwt on the morning report today, down 30 cents from last Friday morning. The western corn belt averaged $62.85/cwt. There were no regional negotiated price quotes this morning for the eastern corn belt or for Iowa-Minnesota.

The top price today at Peoria was $40/cwt, up $2 from last Friday. The top price for interior Missouri live hogs today was $42.75/cwt, up $1.50 from a week ago.

Friday morning's pork cutout value was $76.44/cwt FOB the plants. That is up $1.18 from the week before and up $10.30 from a year ago. Loin and ham prices were higher this week; bellies lower. This morning's national negotiated hog price was 79.7 per cent of the cutout value.

This week's hog slaughter was 2.181 million head, up 0.1 per cent from last week, but down 0.4 per cent from the same week last year. March hog slaughter was a bit over 1 per cent below the level implied by the USDA's March hog inventory report.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 283.5 pounds, up 0.6 pound from the week before and up 0.1 pound from a year ago. Lower corn prices may boost slaughter weights.

The April hog futures contract ended the week at $67.80/cwt, down $1.825 from the previous week. May hogs lost $1.15 this week to close at $75.50/cwt. The June lean hog futures contract ended the week at $79.375/cwt, down $1.475 from the preceding week.

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