Hog Outlook

Ron Plain and Scott Brown
Ag Economics, MU
December 2, 2016

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We've got another record. This week's hog slaughter totaled 2.540 million head, up 18.0% from last week which was light because of Thanksgiving; up 4.8% from the same week last year; and if not revised, the most ever in a week. Prior to this fall packers had never slaughtered 2.5 million hogs in a week. They have done it four times in the last seven weeks.

One would expect record hog slaughter to drive hog prices lower, but cash hogs were strongly higher this week. The national negotiated barrow and gilt carcass price averaged $47.01/cwt on the morning report today, up $5.95 from a week earlier, but down $4.55 from a year ago. The western corn belt averaged $47.77/cwt this morning, up $6.30 from a week ago. Iowa-Minnesota averaged $47.85 up $6.38 for the week. The eastern corn belt did not have a morning price quote today.

The top hog price today at Peoria was $27/cwt, up $2 from a week ago. Today's top price for interior Missouri live hogs was $30/cwt, up $2.25 from last week.

The higher hog prices weren't driven by the cutout value. Friday morning's pork cutout value was $74.02/cwt FOB slaughter plants. That is down 44 cents from the week before, but up 79 cents from a year ago. Loin prices continue to be very weak. This morning's average wholesale loin price ($65.30/cwt) is only 88.2% of the pork cutout value. This morning's national negotiated hog carcass price is 63.5% of the cutout value.

The average slaughter weight of barrows and gilts in Iowa-Minnesota last week was 280.5 pounds. That is unchanged from the week before and down 3.4 pounds from the same week last year. Hopefully, the lighter weights are an indication that producers are very current in their marketings.

Year-to-date hog slaughter is up 1.8%. Because of lighter weights, year-to-date pork production is up only 1.1%

There were 598 million pounds of pork in cold storage at the end of October. That was 6.9% less than the month before and 0.9% less than a year ago. Stocks of frozen beef were up 4.6%, but chicken stocks were down 9.9% compared to October 31, 2015.

Hog futures were lower this week. The December lean hog futures contract ended the week at $50.75/cwt, down 75 cents from the preceding Friday. February hogs settled at $54.025/cwt, down $2.725 from last Friday. The April contract settled at $60.15, down $2.75 for the week. June hogs settled at $72.15/cwt today.

Corn futures ended the week roughly 11 cents lower than last Friday. The December corn futures contract settled at $3.375 per bushel down 11.75 cents for the week. March corn futures closed at $3.4725/bu, down 11.0 cents from last Friday. May corn futures ended the week at $3.5425 per bushel. July corn settled at $3.6175/bushel.

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