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Ron Plain: Hog Outlook

Jan 29, 2016

Ron Plain and Scott Brown
Ag Economics, MU
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This week Seaboard Foods announced an agreement to buy a portion of Christensen Farms hog operations, a feed mill and truck washes for approximately $71.1 million. Seaboard is also entering an agreement with Woodford Creek Farms to raise hogs in Iowa for Seaboard. These acquisitions by Seaboard are part of their effort to increase their hog herd in advance of the opening of the Seaboard Triumph Foods slaughter plant in Sioux City, Iowa.

The latest USDA Cold Storage report said there were 545.6 million pounds of pork in cold storage at the end of December. That was 2.7% less than the month before, but 8.3% more than a year ago. It is the lowest frozen pork stocks since the end of 2014, which is encouraging news. However, stocks of frozen beef were up 15.6% year-over-year and frozen chicken stocks were up 21% compared to December 31, 2014.

The Commerce Department says the U.S. economy grew by a slight 0.7% during the fourth quarter of 2015. For all of 2015, the economy grew 2.4%, the same as in 2014. A growing economy usually translates into growing meat demand.

Hog prices are higher for the fourth consecutive week. The national negotiated barrow and gilt price on the morning report today averaged $59.56/cwt, up $4.86 from last Friday morning. The average negotiated price this morning for the western corn belt was $60.50/cwt. Iowa-Minnesota averaged $60.44/cwt. There was no negotiated price quote this morning for the eastern corn belt.

The top price today at Peoria was $37/cwt, up $3 from last Friday. The top price for interior Missouri live hogs today was $39/cwt, up $2.25 from a week ago.

Friday morning's pork cutout value was $77.39/cwt FOB the plants. That is up $2.86 from the week before, but down $1.82 from a year ago. Loin, ham and belly prices were each higher this week. This morning's national negotiated hog price was 77.0% of the cutout value.

This week's hog slaughter was 2.328 million head, up 0.6% from last week and up 3.9% from the same week last year.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 284.6 pounds, down 0.7 pound from the week before and down 1.5 pounds from a year ago. Iowa-Minnesota slaughter weights have been below the year-ago level for 43 of the last 44 weeks.

The February hog futures contract ended the week at $65.80/cwt, up $2.80 from the week before. April hogs gained $1.70 this week to close at $70.70/cwt. The June lean hog futures contract ended the week at $78.95/cwt, also up $1.70 from the preceding week.

The March corn futures contracted settled at $3.72 per bushel today. That is up 1.75 cents from last Friday.

Source: AGEBB