Hog Outlook

Ron Plain and Scott Brown
Ag Economics, MU
July 22, 2016

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Hog prices were sharply lower this week. The national negotiated barrow and gilt carcass price averaged $69.88/cwt on Thursday, down $4.08 from a week earlier and down $7.31 from two weeks ago. Hog slaughter has started to move seasonally higher and is likely to stay above the year-earlier level for the next several months.

Calculations by Lee Schulz at Iowa State University estimate the average profit for Iowa farrow-to-finish producers was $32.92 per head for hogs marketed during June. This was the fifth consecutive profitable month and the best monthly returns since November 2014. The average cost of production for hogs marketed in June was $46.16/cwt (live) or $61.55/cwt for carcass sales. Production costs were the highest since October 2015.

June commercial hog slaughter totaled 9.5664 million head. That was up 1.5% compared to a year ago and in line with the reported June market hog inventory.

USDA's Crop Progress report says that 76% of corn acres were in good to excellent conditions on July 17. That is unchanged from the week before and 7 points higher than the same date last year. Corn futures were lower for the fifth week in a row.

The national negotiated barrow and gilt price averaged $68.95/cwt on the morning report today, down $3.61 from a week earlier and down $11.32 from four weeks ago. The western corn belt averaged $69.55 this morning, down $3.60 for the week. Iowa-Minnesota averaged $69.49 on the morning report, down $3.67 for the week and the eastern corn belt averaged $68.73/cwt this morning.

The top hog price today at Peoria was $42/cwt, down $6 from a week earlier. Today's top price for interior Missouri live hogs was $49.50/cwt, down $3.75 from last Friday.

Friday morning's pork cutout value was $89.37/cwt FOB the slaughter plants. That is down $1.49 from the week before. Loin and ham prices were lower than last Friday, belly prices higher. This morning's national negotiated hog price is 77.2% of the cutout value, which is unusually low for this time of year.

This week's hog slaughter totaled 2.141 million head, up 0.9% from last week and up 2.2% from the same week last year.

The average slaughter weight of barrows and gilts in Iowa-Minnesota last week was 277.7 pounds. That is down 0.6 pounds from the week before, but up 0.4 pound from the same week last year.

The August lean hog futures contract ended the week at $75.275/cwt, down $2.65 from the preceding Friday. Today, October hogs settled at $63.90/cwt, down $2.10 from last Friday. The December contract settled at $58.475, down $1.10 for the week.

The September corn futures contract lost 17.25 cents this week to close at $3.35 per bushel. December futures closed 16.5 cents lower than last Friday at $3.4175/bu. The March 2017 contract ended the week at $3.515 per bushel.

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