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Ron Plain: Hog Outlook

Hog Outlook

Ron Plain and Scott Brown
University of Missouri
April 5, 2013

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Jobs numbers for March were very disappointing. Only 88,000 jobs were added last month while 496,000 Americans gave up looking for work. People with jobs are what drive meat demand.

The Bank of Japan is pursuing a $1.4 trillion monetary stimulus plan. The plan should lower the value of the yen and thus make foreign products, such as U.S. pork and beef, more expensive to import.

The National Pork Board and the Beef Checkoff are working to modernize and standardize the names for retail meat cuts. Rather than the generic pork chop, the new plan is to sell porterhouse chops, ribeye chops and New York chops.

This week USDA began releasing their new mandatory pork cutout calculations on a timely basis. USDA has collected wholesale pork cut prices under the new mandatory packer reporting rules since early January, but has released the data with a delay to make sure the numbers were accurate. During the first quarter of 2013, the mandatory cutout was based on more than 5 times as many loads of pork as the voluntary wholesale price report. The average pork cutout value adjusted to FOB Omaha was 4.1% higher during January-March than for the voluntary pork reports.

The Thursday afternoon calculated voluntary cutout value was $77.28/cwt, up 7 cents from the previous Thursday. Bellies and hams were higher, butts and loins were lower. Thursday afternoon's mandatory wholesale calculation put the pork cutout at $79.52/cwt, up 13 cents from the week before.

Even though USDA's March hog inventory survey found 0.8% more market hogs than expected, cash hog prices were higher this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $77.53/cwt, up $1.77 from last Friday. The eastern corn belt averaged $76.09/cwt this morning. The western corn belt averaged $80.72/cwt and Iowa-Minnesota averaged $80.92/cwt. Peoria had a top live price this morning of $51.50/cwt. Zumbrota had a live top today of $54/cwt. The top for interior Missouri live hogs Friday was $56.50/cwt, up $3 from the previous Friday.

The average hog carcass price was 100.3% of the carcass value based on voluntary price reports and 97.5% of the calculated cutout value based on mandatory reporting.

Hog slaughter this week totaled 2.088 million head, down 4.4% from the week before and down 1.7% compared to the same week last year. The decline was largely due to reduced slaughter on Easter Monday.

The average barrow and gilt live weight in Iowa-Minnesota last week was 276.2 pounds, up 0.5 pound from a week earlier but down 1.1 pounds from a year ago.

The April lean hog futures contract closed at $80.02/cwt today, down 58 cents from the previous week. May hog futures ended the week $2.65 lower at $86.90/cwt. June hogs settled at $89.70/cwt and July at $89.55/cwt.

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