Ron Plain : Hog Outlook

Ron Plain and Scott Brown
Ag Economics, MU
August 12, 2016

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USDA is forecasting both a record corn crop and a record soybean crop this year. That should hold down feed costs and partially offset the financial losses from low hog prices this fall and winter.

Lackluster growth in the U.S. economy has left meat demand slightly lower than last year. Overall meat demand was down 1.1% during January-June compared to a year earlier. Domestic demand for pork was down 0.4% in June and down 1.6% in the first half of 2016. Export demand for U.S. pork was up 4.8% in June and up 3.3% in the first half of 2016.

U.S. pork exports during June were up 4.5% compared to a year ago, led a 144% increase in shipments to China. Mexico, Japan and China, respectively, were the top three destinations for U.S. pork exports in June. Pork exports were up 1.8% during the first half of 2016.

Pork imports were down 11.8% in June, but up 1.5% in the first half of 2016. Less pork is coming south from Canada, but more is coming in from Europe.

Imports of live hogs from Canada were down 24.2% in June, but up 1.1% in the first half compared to January-June 2015.

Friday morning's pork cutout value was $75.26/cwt FOB the slaughter plants. That is down $2.03 from the week before. Loin, butt, and belly prices were lower than last Friday. Ham prices were higher. Pork belly prices are 62% of what they were three weeks ago.

The national negotiated barrow and gilt price averaged $60.06/cwt on the morning report today, down $2.20 from a week earlier and down $20.21 from seven weeks ago. The western corn belt averaged $61.26/cwt this morning. There were no regional price quotes this morning for the eastern corn belt or for Iowa-Minnesota. This morning's national negotiated hog price is 79.8% of the cutout value.

The top hog price today at Peoria was $39/cwt, down $1.50 from a week ago. Today's top price for interior Missouri live hogs was $43.50/cwt, down $2.25 from last Friday.

This week's hog slaughter totaled 2.236 million head, up 2.0% from last week and up 0.9% from the same week last year.

The average slaughter weight of barrows and gilts in Iowa-Minnesota last week was 275.7 pounds. That is down 0.5 pound from the week before, down 0.5 pound from the same week last year, and the lightest for any week since October 2013.

The August lean hog futures contract ended the week at $67.15/cwt, down 30 cents from the preceding Friday. Today, October hogs settled at $60.00/cwt, up $1.75 from last Friday. The December contract settled at $54.95, up 87.5 cents for the week.

The September corn futures contract lost 2 cent this week to close at $3.2225 per bushel. December futures closed 1.25 cents lower than last Friday at $3.33/bu. The March 2017 contract ended the week at $3.435 per bushel.

Source: AGEBB