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Ron Plain: Hog Outlook

By Ron Plain and Scott Brown
University of Missouri
May 8, 2015
Domestic meat demand has been strong in recent months, but export demand is weak. Domestic pork demand was up 13% in March. March was the 27th consecutive month with demand stronger than a year earlier. Export demand for U.S. pork was down 26% in March.
U.S. pork exports were down 8.9% in March with big declines in shipments to China and Japan. This was the ninth consecutive month with export tonnage lower than a year ago. U.S. pork imports were up 28.6% in March. This was the 13th consecutive month with imports above the year-earlier level. During March, 20.85% of U.S. pork production was exported and imports equaled 4.81% of production.
Hog imports from Canada were up 7.4% in March with the increase coming from more slaughter hogs rather than feeder pigs.
This was another good week for hog prices. Thursday's negotiated carcass price for plant delivered hogs averaged $77.51/cwt which is $4.55 higher than a week earlier.
Peoria had a top live price today of $52/cwt, $4 higher than last Friday. The top price today for interior Missouri live hogs was $54.25/cwt, up $6 from the previous Friday.
The national average negotiated barrow and gilt purchase price on the morning report today was $76.39/cwt. The western corn belt averaged $77.98/cwt and Iowa Minnesota had a morning average of $77.00/cwt. There was no eastern corn belt negotiated price quote this morning.
This morning's pork cutout value was $79.05/cwt FOB the plants. That is up $5.13 from the week before, but down $33.30 from a year ago. For the fifth week in a row, wholesale belly prices are lower than the pork cutout value.
Packer margins improved some this week, but are still unsustainably tight. Thursday's national negotiated hog price equaled 96.6% of the cutout value. Look for packers to continue to cut back on their slaughter hours.
Hog slaughter this week totaled 2.111 million head, down 2.2% from the week before, but up 5.2% from same week last year. Year-to-date hog slaughter is up 5.5% and pork production is up 5.6%. Since March 1, slaughter has averaged a bit over 1% above the level implied by the March inventory survey.
The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 282.0 pounds, up 0.2 pound from the week before, but down 5.0 pounds from a year ago. This was the sixth consecutive week with weights lighter than last year.
The May lean hog futures contract closed today at $80.85/cwt, up $4.85 for the week. June hog futures ended the week at $84.82/cwt, up $3.57 from the week before. July hogs gained $1.87 this week to close at $83.92/cwt. The August contract settled at $84.22/cwt.
USDA estimates that 55% of corn acres had been planted by May 3. That is 36 points ahead of last week, 27 points ahead of last year, and 17 points ahead of the five year average.
The May corn futures contract settled at $3.585/bushel today.

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