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Ron Plain Hog Outlook: Concerns Over Chinese Economy.

Hog Outlook

Ron Plain and Scott Brown
University of Missouri
August 28, 2015

The stock market has had a wild couple of weeks. In the six days ending on Tuesday August 25, the Dow Jones Industrial Average lost 1,878 points (10.7%). On Wednesday and Thursday it gained back 988 points (6.3%). The turmoil is related to concerns about the Chinese economy.

On Thursday the Commerce Department said the U.S. economy grew at an annual rate of 3.7% during the second quarter. This better-than-expected news helped boost the stock market. This follows a dismal 0.6% growth rate in the first quarter. Meat demand usually correlates with economic growth.

The spot price for West Texas Intermediate crude oil in Cushing, OK dropped below $40 per barrel for the first few days this week. That is the lowest price since February 2009. Low energy prices are usually positive for economic growth.

There was a lot of meat in cold storage at the end of July. Frozen red meat and poultry totaled 2.403 billion pounds on July 31, up 2.5% from the month before and up 16.7% from a year ago. Pork in cold storage on July 31 totaled 635 million pounds, up 0.1% from the month before and up 19.1% from a year ago. July was the sixth consecutive month with pork stocks above the year-ago level.

The national negotiated barrow and gilt price on the morning report today was $71.05/cwt, down $1.84 from last Friday morning. The western corn belt averaged $70.34/cwt this morning, down 77 cents for the week. The eastern corn belt morning average was $71.23, down $1.98 for the week. There was no negotiated price quote this morning for Iowa-Minnesota.

Peoria had a top live price today of $47/cwt, down $1 from last Friday. The top price today for interior Missouri live hogs was $50.50/cwt, down $2.25 from the previous Friday.

This morning's pork cutout value was $85.27/cwt FOB the plants. That is down $2.09 from the week before. Packer margins continue to be good for this time of year. This morning's national negotiated hog price was only 83.3% of the cutout value.

This week's hog slaughter totaled 2.214 million head, down 0.5% from last week, but up 11.4% from the same week last year. Hog slaughter has been up by more than 10% in all but one of the last 13 weeks.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 277.2 pounds, up 1.7 pounds from a week earlier, but down 4.9 pounds from a year ago. This was the 22nd consecutive week with weights lighter than last year.

The October lean hog futures contract settled today at $66.425/cwt, up $1.675 for the week. December hog futures ended the week at $62.05/cwt, up 75 cents from the week before. February hogs gained 2.5 cents this week to close at $66.175/cwt.

USDA says that 69% of corn acres were in good or excellent condition as of August 23. That is the same as the week before but 4 points lower than a year ago. Corn futures lost 2 cents this week with the September contract closing at $3.6325/bushel.

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