Ron Plain: Hog Outlook

Ron Plain and Scott Brown
Ag Economics, MU
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For 2015, U.S. commercial hog slaughtered totaled roughly 115,391,900 million head. That was up 8% from 2014 and the second highest year ever, after 2008. Don't be surprised if 2016 hog slaughter breaks the 2008 record.

USDA estimates 2015 U.S. meat production was 2.8% higher than in 2014 and is forecasting a 2.7% increase in production during 2016. That is much faster growth than for the population, thus meat prices are expected to decline. USDA expects a 1.6% increase in pork production, a 4.3% increase in beef production, a 1.8% increase in broiler production and a 7.5% increase in turkey production compared to 2015. They expect pork production to exceed beef production for the second year in a row.

In the January WASDE, USDA left their corn price forecast for the current marketing year unchanged at $3.65 per bushel plus or minus 30 cents. They reduced their forecast of the average soybean meal price by $10 to $310/ton plus or minus $20.

Pork exports were up 18.4% in November compared to a year earlier thanks to strong sales to Mexico, Japan, China and Hong Kong. Pork imports were up 11.5%. In November, exports equaled 20.7% of U.S. pork production while imports equaled 4.8% of production. Imports of live hogs were up 25% compared to November 2014.

The national negotiated barrow and gilt price on the morning report today was $48.99/cwt, up $1.22 from last Thursday morning. The western corn belt averaged $50.27/cwt this morning, up $1.75 cents from last Friday morning. Iowa-Minnesota also averaged $50.27/cwt, up $1.69 cents from last Thursday. There was no negotiated price quote this morning for the eastern corn belt.

The top price today in Peoria was $32/cwt, up $4 from last week. The top price Friday for interior Missouri live hogs was $33/cwt, the same as a week ago.

Friday morning's pork cutout value was $70.77/cwt FOB the plants. That is up $1.92 from the week before. Loin, ham and belly prices were each higher. This morning's national negotiated hog price was only 69.2% of the cutout value.

This week's hog slaughter was 2.375 million head, up 17.2% from last week which was low because of the New Years holiday and up 10.6% from the same week last year.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 286.3 pounds, up 3.2 pounds from a week earlier, but down 1.4 pounds from a year ago. Iowa-Minnesota slaughter weights have been below the year-ago level for 40 of the last 41 weeks.

The February hog futures contract ended the week at $59.85/cwt, up 5 cents from the week before. April hogs lost 73 cents this week to close at $65.225/cwt. The June lean hog futures contract ended the week at $77.075/cwt, down 92 cents from the preceding week.

The March corn futures contracted settled at $3.53 per bushel today. That is down 6 cents from last Friday.

Source: AGEBB