Hog Outlook

Ron Plain and Scott Brown
University of Missouri
July 24, 2015

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Hog producers continue to supply a lot of pork to the market. Commercial pork production in June came in 15.1% above the year ago level and caused production for the first half of the year to surpass the 2014 number by 7.1%. This is in spite of dressed hog weights that have been running 2-3 pounds lighter than last year for the past three months.

A lot of the additional production volume is ending up in storage. Frozen pork stocks at the end of June were at the highest level ever for that month, 17.6% higher than 2014. Ham inventories were particularly burdensome, as users begin preparing for holiday demand later this year. Perhaps the relative shortage of turkey availability is driving higher demand for stored ham supplies. Chicken production continues well above last year's level also. Demand for meat and pork will need to continue strong to keep hog prices reasonable for producer profitability.

Corn conditions remained at 69% good/excellent in this week's survey. Though certain areas of the country are struggling with too much moisture, the nation as a whole appears on pace to produce a solid corn crop this year, which should keep feed costs at tolerable levels for livestock producers.

Cash hog prices were mixed for the week. Thursday's average negotiated carcass price for plant delivered hogs was $74.27/cwt, down $1.39 against last week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $73.36/cwt. This was $1.20/cwt lower than a week ago, and $49.28 lower than a year ago. However the morning price quote today for Iowa-Minnesota was $0.09/cwt higher than last week at $74.66/cwt. The western corn belt price advanced a penny on the week to $74.58/cwt. There was no quote for the eastern corn belt. Peoria had a top price today of $49/cwt, with Zumbrota at $51/cwt. Interior Missouri live hogs had a top of $53.50/cwt.

The pork cutout value moved $3.82 higher for the week, with this morning's cutout at $85.49/cwt FOB the plants. All of the primals with the exception of ribs were up for the week, with bellies advancing the most at 11.1%. Today's value was still $47.38 lower than a year ago. This morning's national negotiated hog price equaled 85.8% of the cutout value, a drop of 5.5% vs. last week.

Hog slaughter for this week came in at 2.107 million head, up 13.1% from the same week last year. Year to date slaughter is 7.3% above 2014. The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 277.3 pounds, a large drop of 2.0 pounds from the week before and 7.5 pounds lower than the same week last year.

The August lean hog contract ended the week at $77.62/cwt, up $1.95/cwt from the previous Friday. October closed at $64.07, up 62 cents. The December lean hog futures contract gained 85 cents to $61.52/cwt, and February hogs finished at $67.72/cwt.

September corn closed today at $3.925/bu, down nearly 28 cents from last Friday. December closed at $4.0275.

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