Ron Plain and Scott Brown
Ag Economics, MU
December 9, 2016
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USDA made few changes to 2017 pork projections in today's monthly WASDE release. The 2017 average mid-point hog price is projected 12.6% lower than where we will end up in 2016. Larger pork and total meat supplies are to blame, with pork production expected to jump 3.5% more next year.
October pork exports were 9% larger than a year ago, even as exports to China continue to moderate. With production recovery ongoing in China, it will be difficult to return to the quantity of pork shipped there this spring anytime soon. YTD pork exports are 2% above 2015, even as trade with Japan and Mexico trails year ago levels.
Cash hogs had another week of solid gains. The national negotiated barrow and gilt carcass price averaged $52.12/cwt on the morning report today, up $5.11 from a week earlier, and $2.19 higher than a year ago. The western corn belt averaged $51.76/cwt this morning, up $3.99 from a week ago. Iowa-Minnesota also averaged $51.76, up $3.91 for the week. The eastern corn belt did not have a morning price quote today.
The top hog price today at Peoria was $27/cwt, unchanged from a week ago. Today's top price for interior Missouri live hogs was $30/cwt, also the same level as last week.
The pork cutout value also gained ground, though not as much as hog prices. Friday morning's pork cutout value was $75.81/cwt FOB slaughter plants. That is $1.79 higher than the week before, and 93 cents higher than a year ago. This morning's national negotiated hog carcass price is 68.8% of the cutout value, up from just 63.5% last week.
This week's hog slaughter fell back a little to 2.443 million head, down 3.6% from last week, and up just 0.5% from the same week last year. Is it possible that the heaviest of the weekly runs are almost behind us?
The average slaughter weight of barrows and gilts in Iowa-Minnesota last week was 281.2 pounds. That is 0.7 pounds heavier than the week before, but still down 3.2 pounds from the same week last year. Year-to-date hog slaughter is up 1.7%.
Preliminary December consumer confidence numbers were just shy of the highest levels since 2004, with much of the consumer optimism centered on expectations for President-elect Trump's economic policies. This bodes well for domestic meat demand moving forward, a necessary condition to move heavy meat supplies for the next couple of years.
Hog futures advanced sharply this week. The December lean hog futures contract ended the week at $56.72/cwt, up $5.97 from the preceding Friday. February hogs settled at $61.55/cwt, up $7.53 from last Friday. The April contract settled at $65.92, up $5.77 for the week. June hogs settled at $76.55/cwt today.
Corn futures gained this week as well. The December corn futures contract settled at $3.525 per bushel, up 15 cents for the week. March corn futures closed at $3.595/bu, up 12.25 cents from last Friday. May corn futures ended the week at $3.6625 per bushel. July corn settled at $3.735/bushel.
Source: AGEBB