Ron Plain : Hog Outlook

Ron Plain and Scott Brown
Ag Economics, MU
September 23, 2016
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This week's hog slaughter totaled 2.466 million head. That is the third largest weekly slaughter ever. It is up 4.8% from last week and up 8.0% from the same week last year. The only two weeks with larger hog slaughter were the weeks before Christmas in 2015 and in 2007. It is remarkably early in the fall for such a huge slaughter number.

The typical Iowa market hog was sold at a profit of 70 cents per head during August, according to calculations by Lee Schulz at Iowa State University. August was the seventh consecutive profitable month. It is very likely that subsequent months will contain losses. Cost of production for hogs marketed in August was $46.24/cwt (live) or $61.65/cwt (carcass) according to ISU.

Slaughter hog prices were roughly $3 lower this week as hog slaughter continues to run at record high levels for this time of year. The national negotiated barrow and gilt price averaged $49.94/cwt on the morning report today, down $3.19 from a week earlier and down $16.79 from a year ago. The western corn belt averaged $49.36/cwt this morning, down $3.52 from last Friday. There was no regional price quotes this morning for the eastern corn belt or for Iowa-Minnesota.

The top hog price today at Peoria was $32/cwt, down $3 from a week ago. Today's top price for interior Missouri live hogs was $36.75/cwt, down $2.25 from last Friday.

Friday morning's pork cutout value was $77.27/cwt FOB slaughter plants. That is down $3.82 from the week before. Loin, ham and butt prices were lower, bellies higher. This morning's national negotiated hog price is only 64.6% of the cutout value.

The average slaughter weight of barrows and gilts in Iowa-Minnesota last week was 281.6 pounds. That is up 1.4 pounds from the week before and up 2.7 pounds from the same week last year. This was the first up week that weights were above the year-ago level since the week ending July 16.

Year-to-date hog slaughter is up 0.8% but because of lighter slaughter weights, year-to-date pork production is only up 0.2% compared to this point in 2015.

Hog futures were lower this week. The October lean hog futures contract ended the week at $54.00/cwt, down $1.475 from the preceding Friday. Today, December hogs settled at $48.90/cwt, down $1.05 from last Friday. The February contract settled at $53.35, down $1.025 for the week. June hogs settled at $70.75 today.

Corn futures were slightly lower this week. The December corn futures contract lost 0.5 cents this week to close at $3.365 per bushel. March corn futures closed 1 cent lower than last Friday at $3.4625/bu. May ended the week at $3.5275 per bushel.

Source: AGEBB