Hog Outlook
Glenn Grimes & Ron Plain
University of Missouri
July 2, 2009
This report is being written a day early this week because of the Independence Day holiday.
The big news this week was USDA's June 30 plantings report. USDA said actual corn acres planted in 2009 is 87.0 million, up 2.0 million from their March estimate and the second largest acreage since 1946. Soybean acreage was up 1.5 million and wheat up 1.1 million compared to the March forecast. Most corn futures contracts closed down the 30 cent limit on Tuesday. The December corn futures contract ended the week at $3.575/bu, 46.75 cents lower than it started. If corn averages $3.50/bushel, the breakeven price for hogs should be close to $50/cwt live.
USDA's June hogs and pigs report had few surprises. The breeding herd is down 2.7%, summer farrowings are expected to be down 3.3%, and fall farrowings off by 2.2%. But, increased productivity is offsetting much of this decline. Pigs per litter were up 2.5% in March-May and have averaged 2.45% higher for the last four quarters. Over the last 6 weeks, barrow and gilt carcass weights have averaged 2% higher than a year earlier. Hog slaughter in the second half of 2009 is expected to be down 3% or so. Due largely to fewer Canadian hogs coming south, the June 1 inventory of market hogs weighing less than 60 pounds was down 2.4% even though the March-May pig crop was only down 0.3%
A strong surge on Thursday brought western corn belt carcass prices above week-earlier levels and above the cutout value. The top price Thursday at Zumbrota, MN was $37/cwt. Peoria had a top of $35/cwt. The interior Missouri top Thursday was $40/cwt, unchanged for the week. The national weighted average carcass price Thursday morning for negotiated hogs was $56.83/cwt, $1.67 higher than the previous Friday but $11.52/cwt lower than a year ago. Regional average prices on Thursday morning were: eastern corn belt $52.90, western corn belt $59.73, and Iowa-Minnesota $59.73/cwt.
USDA's Wednesday afternoon calculated pork cutout value was $53.77/cwt, down $1.09 from the previous Thursday. Hams were higher than the week before but loins, bellies, and Boston Butts were lower. At this time last year, the pork cutout was over $78/cwt.
This week's hog slaughter is estimated by trade sources to be 1.87 million head, up 9.2% compared to the same week in 2008 (the 4th came on Friday last year).
The average carcass weight of barrows and gilts slaughtered the week ending June 20 was 199 pounds, 5 pounds heavier than for the same week in 2008. Iowa-Minnesota live weights last week averaged 265.1 pounds, up 3.4 pounds compared to last year.
The July lean hog futures contract ended the week at $59.97/cwt, up $3.27 from last Friday. The August contract settled at $61.15 today, up $3.45 for the week. October closed the week at $57.17/cwt and December closed at $58.25/cwt.
Hog producers have lost money 19 of the last 21 months. Today's prices are roughly $15/head below breakeven. Higher prices are badly needed.