Hog Outlook
Ron Plain
University of Missouri
October 21, 2011
Retail pork prices were record high during September for the second consecutive month. Pork in grocery stores averaged $3.561 per pound, up 4.9 cents from August and 26.1 cents higher than in September 2010.
The U.S. dollar reached a record low against the Japanese Yen this week with only 76 yen needed to buy a dollar. The dollar is the weakest against the Chinese Yuan of anytime since 1993. A weak dollar helps boost U.S. exports and makes imports more costly. Both U.S. beef and pork are expected to set annual export records this year.
Domestic meat demand was soft this summer, but export demand was very strong leaving packer demand for hogs and cattle up compared to the summer of 2010.
Calculations by Shane Ellis at Iowa State University estimate the typical Iowa farrow to finish operation lost $2.65 for each hog sold during September. September was the first unprofitable month since January. Cost of production was estimated at $67.75/cwt of live weight, a new record for the eighth consecutive month.
USDA's Thursday afternoon calculated pork cutout value was $99.40/cwt, up $1.72 from the previous Thursday. Loins were lower. Hams, butts and bellies were higher. Pork cutout was above $100 on Wednesday for the first time since August. For this time of year, both pork cutout and hog prices are unusually high.
Hog prices rose this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $91.07/cwt, up $1.05 from last Friday. The Friday morning price report for the western corn belt was $91.29/cwt with Iowa-Minnesota at $91.57. Eastern corn belt hogs averaged $90.76 this morning. Friday's top live hog price at Peoria was $62/cwt. Zumbrota's top was $63/cwt. The top for interior Missouri live hogs was $66/cwt, up $1.50 from the previous Friday.
Hog slaughter totaled 2.323 million head this week, the same as last week and down 0.8% compared to the same week last year. This is the first week with hog slaughter below year-ago since mid August. Barrow and gilt carcass weights for the week ending October 8 averaged 202 pounds, up 1 pound from the week before and unchanged from a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged 272.3 pounds, down 0.4 pounds from the week before and down 1.7 pounds compared to last year.
Today's close for the December lean hog futures contract, $89.65/cwt, was down 42 cents from last Friday. The February lean hog futures contract settled at $92.02/cwt, down 53 cents from the previous Friday. April gained 30 cents this week to settle at $94.75/cwt. The cash equivalent of the lean hog futures closes for December and February are higher than the cash market has ever been for those months.