Ron Plain : Hog Outlook

Ron Plain and Scott Brown
Ag Economics, MU
August 5, 2016

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The Labor Department had some good news today. The U.S. economy added 255,000 jobs during July. That was 75,000 above trade expectations. Average wages increased by 8 cents per hour. The unemployment rate held steady at 4.9%. More people with money is good for meat demand.

Four of the ten largest hog slaughter weeks were in November and December 2015. The week ending on December 19, 2015 is the record holder with 2,498,954 hogs slaughtered. Fourth quarter slaughter this year is expected to be 2% higher than last year, so more slaughter records are likely. That means extremely low hog prices are also likely.

This week's hog slaughter totaled 2.193 million head, up 0.4% from last week and up 3.2% from the same week last year. Year-to-date hog slaughter is up 0.2%, but because of lighter slaughter weights, year-to-date pork production is down 0.3%.

The average slaughter weight of barrows and gilts in Iowa-Minnesota last week was 276.2 pounds. That is down 1.1 pounds from the week before and unchanged from the same week last year.

The national negotiated barrow and gilt carcass price averaged $63.88/cwt on Thursday, down $2.74 from a week earlier and down $17.42 from six weeks ago.

Friday morning's pork cutout value was $77.29/cwt FOB the slaughter plants. That is down $1.56 from the week before. Loin, butt and ham prices were lower than last Friday. Belly prices, which have been highly volatile in recent days, were slightly higher after a huge decline last week.

The national negotiated barrow and gilt price averaged $62.26/cwt on the morning report today, down $2.93 from a week earlier and down $18.01 from six weeks ago. There were no regional prices quotes this morning for the eastern corn belt, the western corn belt, or for Iowa-Minnesota. This morning's national negotiated hog price is 80.6% of the cutout value.

The top hog price today at Peoria was $40.50/cwt, down $1.50 from a week ago and down $7.50 from three weeks earlier. Today's top price for interior Missouri live hogs was $45.75/cwt, down $1.50 from last Friday.

The August lean hog futures contract ended the week at $67.45/cwt, down $1.525 from the preceding Friday. Today, October hogs settled at $58.30/cwt, down 75 cents from last Friday. The December contract settled at $54.075, down 67.5 cents for the week.

It looks likely that this year's corn harvest will be a new record. USDA's Crop Progress report says that 76% of corn acres were in good or excellent conditions on July 31. That is unchanged from the week before and 6 points higher than the same date last year.

The September corn futures contract lost 10.25 cent this week to close at $3.2425 per bushel. December futures closed 8.5 cents lower than last Friday at $3.3425/bu. The March 2017 contract ended the week at $3.445 per bushel.

Source: AGEBB