Ron Plain : Hog Outlook

Ron Plain and Scott Brown
Ag Economics, MU
December 16, 2016

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We've got another record. This week's hog slaughter totaled 2.544 million head, up 4.1% from last week, up 1.8% from the same week last year, and 1,000 head more than the old record set two weeks ago. Prior to this fall, packers had never slaughtered 2.5 million hogs in a week. They have done it five times in the last nine weeks.

Naturally, record production is pushing down prices. The average retail price of pork was $3.625 per pound during November. That is 11.8 cents lower than in October, 29.2 cents lower than in November 2015, and the lowest monthly average price since June 2013.

The average live price of 51-52% lean hogs marketed in November was $34.45/cwt. That is $2.62 lower than the month before, $7.56 lower than a year ago and the lowest monthly average price since January 2003.

By one measure, the U.S. dollar is the strongest against foreign currencies since May 2002. That is not good for exports as it makes U.S. products expensive for foreign customers. It is especially problematic for hogs since roughly one quarter of the value comes from exports.

The national negotiated barrow and gilt carcass price averaged $51.88/cwt on the morning report today, down 24 cents from a week earlier, but up $4.07 from a year ago. The western corn belt averaged $51.82/cwt this morning, up 6 cents from a week ago. The eastern corn belt did not have a morning price quote today, nor did Iowa-Minnesota.

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 $35.25/cwt, up $5.25 from last week.

Friday morning's pork cutout value was $78.18/cwt FOB the slaughter plants. That is up $2.37 from the week before and up $6.33 from a year ago. Loin prices continue to be weak. This morning's national negotiated hog carcass price is 66.4% of the cutout value.

The average slaughter weight of barrows and gilts in Iowa-Minnesota-South Dakota last week was 280.7 pounds. That is down 0.5 pound from the week before and down 3.4 pounds from the same week last year.

Hog futures were higher this week. The February lean hog futures contract ended the week at $64.70/cwt, up $3.15 from the preceding Friday. April hogs settled at $68.30/cwt, up $2.35 from last Friday. The May contract settled at $73.90, up $1.98 for the week. June hogs settled at $77.95/cwt today.

Corn futures ended the week roughly 3 cents lower than last Friday. The March corn futures contract settled at $3.5625 per bushel down 3.25 cents for the week. May corn futures closed at $3.63/bu, also down 3.25 cents from last Friday. July corn futures ended the week 3 cents lower at $3.705 per bushel. September corn settled at $3.7775/bushel.

Source: AGEBB