The average retail price of pork in grocery stores during July was $3.185 per pound. The good news is that this was the third consecutive month with record high retail pork prices. The bad news is that the calculated domestic demand for pork during July was nearly 4% below year-ago levels. How can prices be record high and demand be down? Two reasons, in calculating demand we use the deflated price of pork. Adjust for inflation, July retail pork prices were not even in the top 100 months. We also account for the quantity purchased. The record nominal pork prices are being accompanied by what appears to be the lowest daily per capita pork purchases in the past decade.
Given the state of the U.S. economy, it should not be surprising that pork demand is soft. Pork and hog prices are up because the supply is down. The swine herd is likely to start expanding next year. The U.S. economy had better grow too, otherwise hog and pork prices might just drop as fast as they have risen.
USDA’s Thursday afternoon calculated pork cutout value was $94.36/cwt, up $4.58 from the previous Thursday and only 5 cents below the all time record high set August 15, 2008. Loins, butts, hams and bellies were all higher. Bellies averaged $1.4268 per pound, higher than any date prior to August 3, 2010.
Higher cutout prices usually mean higher hog prices. The national weighted average carcass price for negotiated hogs Friday morning was $80.64/cwt, $4.93 higher than the previous Friday. Regional average prices on Friday morning were: eastern corn belt $78.74, western corn belt $81.41, and Iowa-Minnesota $81.40/cwt. The top live hog price Friday was $60/cwt at Sioux Falls, $54 at Peoria, and $55.50 at Zumbrota. The interior Missouri live top Friday was $55.75/cwt, 75 cents higher than the previous Friday.
This week’s hog slaughter totaled 2.073 million head, up 0.8% from the week before, but down 7.2% compared to slaughter during the same week last year. This was the highest weekly slaughter since the week ending on April 3. The annual low in daily hog slaughter usually occurs in June or July. Do not be surprised if slaughter is above 2 million hogs during each non-holiday week for the rest of the year.
As usually happens at this time of year, slaughter weights are declining. The average carcass weight of barrows and gilts slaughtered the week ending August 7 was 197 pounds, the same as the week before but 1 pound lighter than a year earlier. Iowa-Minnesota live weight last week averaged 265.6 pounds, down 1.2 pounds compared to a week earlier and 1.5 pounds lighter than the same week last year.
The October lean hog futures contract ended the week at $77.20/cwt, up $2.55 from the previous Friday. The December contract settled at $74.07 for the week. February closed the week at $76.72/cwt.
The September CBOT corn contracted ended the week at $4.21’2/bushel, up 10 cents from the last week.
By Ron Plain
University of Missouri