Hog Outlook

Ron Plain and Scott Brown
University of Missouri
March 20, 2015

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Iowa State University calculations estimate the average hog marketed in February sold for $3.12 per head less than the cost of production. February was the first month with red ink since December 2013. Lee Schulz estimates the average breakeven price in February at $49.81/cwt live or $66.42/cwt of carcass.

Domestic pork demand was up 14.9% in February, but foreign demand for U.S. pork was down 23.1%. U.S. pork demand has been above the year-ago level for each of the last 25 months. Export demand for U.S. pork as been down for six months in a row. I would say the strong dollar and the labor problems at west coast docks were the main causes of the weak export demand.

Through the first ten full weeks of 2015, year-over-year pork production was up 6.1%, but the pork cutout value was down 12.2% and hog prices were down 19.6%. This is a greater price decline than expected given the supply increase and likely reflects the weak export demand.

During the same ten weeks, hog slaughter was up 5.2%, but sow slaughter, adjusted for increased sow imports from Canada, was up only 1.7%. That would seem to imply rapid breeding herd growth, but our gilt slaughter data shows a higher percent of gilts in the barrow-gilt slaughter mix. The other important factor is just how much of the slaughter increase is due to lower death loss.

Friday morning's pork cutout value was $67.52/cwt FOB the plants. That is down 22 cents from the week before and down $63.52 from a year ago. This is the ninth consecutive week with a lower cutout value.

Thursday's negotiated carcass price for plant delivered hogs averaged $57.89/cwt which is $2.75 lower than a week earlier and $64.71 lower than a year ago.

Because of low sales volume and confidentiality rules, there were no national or regional negotiated hog carcass price reports this morning.

Peoria had a top live price today of $37/cwt, $3 lower than seven days ago. The top price Friday for interior Missouri live hogs was $42.25/cwt which is down $3.50 from the previous Friday.

Hog slaughter this week totaled 2.237 million head, up 0.4% from the week before and up 9.8% from same week last year. Hog slaughter has been above the year ago level for the last nine weeks.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 284.0 pounds, down 0.2 pound from the week before, but up 1.0 pounds from a year ago.

Hog futures were sharply lower again this week. The April lean hog futures contract closed today at $58.45/cwt, down $3.65 for the week. May hog futures ended the week at $68.27/cwt, down $3.15 from the week before. June hogs lost $1.57 this week to close at $73.85/cwt.

The May corn futures contract ended the week at $3.85/bu, up 11 cents for the week.

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