Ron Plain : Hog Outlook
The U.S. economy continues to perform poorly. Non-farm payrolls increased by only 54,000 jobs during May, the smallest increase in eight months. The unemployment rate increased from 9.0% in April to 9.1% in May. This is the highest unemployment rate since December. The livestock industry has cut production to boost prices so they can pay their record feed bills. Both retail beef and retail pork prices were record high in April. Unfortunately, a weak economy makes record meat prices very difficult to sustainable. Part of the economy's problem is high energy prices. The average price of gasoline in May was $3.96 per gallon, up 10.8 cents from April, up $1.07 from May 2010 and the third highest month ever.
Smithfield Foods has announced they have discontinued efforts to buy the remaining shares of Campofrio Food Group, a Spanish pork processor.
Cash hog prices were slightly lower this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $87.68/cwt, down 51 cents from last Friday. Neither the eastern corn belt, western corn belt nor Iowa-Minnesota had enough volume early this morning for a market report. On Thursday, the western corn belt was $4.31/cwt above the eastern corn belt. Friday's top live hog price at Peoria was $60/cwt. Zumbrota's top was $61/cwt. The top for interior Missouri hogs was $62.25/cwt, unchanged from the previous Friday. The pork cutout value declined for the second week in a row. USDA's Thursday afternoon calculated pork cutout value was $88.47/cwt, down $1.28 from the previous Thursday. Hams, butts, and bellies were lower, loins higher. This morning's national average hog carcass price equaled 99% of the pork cutout value. That will keep downward pressure on hog prices.
Because Monday was Memorial Day, hog slaughter totaled only 1.746 million head this week, down 14.0% from the week before and down 2.4% compared to the same week last year. During the first 20 weeks of the year, sow slaughter was down 2.4%. The number of Canadian sows imported for slaughter was down 17.9%, leaving the slaughter of U.S. sows up 0.9%.
Barrow and gilt carcass weights for the week ending May 21 averaged 203 pounds, down 1 pound from a week earlier, but 2 pounds heavier than a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged 269.9 pounds, down 1.0 pound from the week before and down 0.9 pounds compared to the same week last year. This is the first time Iowa-Minnesota weights have been below the year-earlier level since the week ending on September 11, 2010.
The June lean hog futures contract ended the week at $89.22/cwt, up 30 cents from the previous Friday. The July contract settled Friday at $87.95/cwt, down 65 for the week. August hogs settled at $89.45 and October closed at $83.90/cwt.
The July corn futures contract lost 4 cents this week to end at $7.54/bushel. September corn settled at $7.31.