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Ron Plain: Hog Outlook.

Hog Outlook

Ron Plain and Scott Brown
University of Missouri
November 30, 2012

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Iowa State University calculations estimate the average Iowa market hog sent to slaughter during October cost a record $73.29 per hundred pounds of live weight to raise and was sold at a loss of $31.16 per head. This was the third consecutive monthly record high for cost of production. Cost of production this year is expected to average a bit over $68/cwt, $3 dollars above the 2011 record. Thus far in 2012, the average hog has sold at a loss of $8 per head. When the year is over, losses are expected to average between $11 and $12 per head, making this the worst year financially since 2009.

There were 606 million pounds of pork in cold storage at the end of October. That was down 4% from the month before, but up 24% compared to a year ago. Increased stocks of frozen pork often correlate with increased pork exports.

Retail pork demand was up 3.0% in September, but export demand was down 11.6%. Live hog demand was down 0.8%.

This was a very good week for hog and pork prices. The Thursday afternoon calculated pork cutout value was $84.19/cwt, up $2.27 from the previous Thursday. Loin prices were a bit lower, but hams, bellies and butts were higher for the week.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $80.76/cwt, up $8.69 from last Friday. The eastern corn belt was $8.50 higher than last Friday at $80.44/cwt. The western corn belt and Iowa-Minnesota prices both increased by more than $6.75 to $81.84/cwt this morning. Peoria had a top live price this morning of $54 and Zumbrota had a live top today of $56/cwt. The top for interior Missouri live hogs Friday was $57.25/cwt. The average hog carcass price is 95.9% of the cutout value, which is unusually high for this time of year.

Hog slaughter this week totaled 2.399 million head, up 16.1% from the week before (which was low because of the Thanksgiving holiday) and up 1.5% compared to the same week last year. Year-to-date hog slaughter is 1.9% above 2011. USDA's September hog inventory survey implies December and January barrow and gilt slaughter will be down 1% from 12 months earlier.

The average barrow and gilt live weight in Iowa-Minnesota last week was 274.4 pounds, 0.5 pounds above a week earlier, but down 1.6 pounds from a year ago. This was ninth consecutive week with weights under the year-ago level.

Friday's close for the December lean hog futures contract was $84.07/cwt, up $1.60 from the previous Friday. February hog futures ended the week 45 cents lower at $86.92/cwt. April hogs settled at $91.77/cwt; June at $101.52/cwt.

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