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Ron Plain: Hog Outlook

Hog Outlook

Ron Plain and Scott Brown
University of Missouri
May 17, 2013

The average price of pork in grocery stores during April was $3.458 per pound. That was down 0.8 cents from March and down 0.1 cents from April 2012. Over the last two years, the retail price of pork has increased 2.4%. The cost of raising hogs has increased 12.6%.

The average April live price for 51-52% lean hogs was $57.71/cwt, up $3.43 from the month before, but down $1.28 compared to April 2012.

The average retail price of choice beef in April was $5.264/pound. Over the last three Aprils, the price ratio of choice beef to pork at retail has increased from 1.59 to 1.63 to 1.76. The ratio of boneless choice sirloin steak to boneless pork chops has increased from 1.43 to 1.44 to 1.52. So has this rise in beef prices relative to pork prices caused a shift in demand to pork? And if it has, how can you tell? The closest pork substitute for a steak is a pork chop. If consumers are shying away from steak because of price, then pork chop demand should be increasing faster than overall pork demand. But the data says otherwise. The ratio of the price of boneless pork chops to all pork has declined from 1.17 to 1.15 to 1.13 over the last 3 Aprils. Pork chops are carrying less of the value of pork than three years go. Over the last 10 years, the retail price of bacon has increased 39.1%, ham prices have increased 41.2% and pork chops are up a mere 2.3%.

After 5 years of decline, USDA is forecasting an increase in the amount of corn available to be fed in the U.S. The latest prediction is that feed and residual use of corn for September 2013 thru August 2014 will total 5.325 billion bushels. That is up 21% compared to the prior 12 months and the most since 2007-8.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $90.37/cwt, up $1.11 from last Friday and up $16.17 from four weeks ago. The eastern corn belt averaged $90.31/cwt this morning. Both the western corn belt and Iowa-Minnesota reported a morning average of $91.20/cwt. Peoria had a top live price this morning of $60/cwt. Zumbrota, MN topped at $61.50/cwt. The top for interior Missouri live hogs Friday was $64.50/cwt, unchanged from the previous Friday.

Friday morning's pork cutout calculation based on mandatory price reporting was $92.61/cwt FOB plants, up $2.26 from the week before. The average hog carcass price is 97.6% of the calculated pork cutout value.

Hog slaughter this week totaled 2.035 million head, down 2.1% from the week before and down 3.9% compared to the same week last year. The average barrow and gilt live weight in Iowa-Minnesota last week was 276.8 pounds, unchanged from a week earlier, but up 0.3 pound from a year ago.

The June lean hog futures contract closed at $91.52/cwt today, up $1.02 from the previous week. July hog futures ended the week 7 cents higher at $90.97/cwt; August hogs at $90.15/cwt.

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