Ron Plain: Hog Outlook.

Ron Plain and Scott Brown
University of Missouri
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Monthly meat trade data for June is now available, and for each of the first six months of 2014 pork exports have exceeded the year ago level. Year to date export levels are 7.4% above 2013, an incredible feat given product price increases during the first half of the year. Most of the gains in the total can be attributed to growth in Mexico and South Korea.

Hog prices declined again this week, following the fairly typical seasonal pattern of the highest prices occurring in June and July, with a drop-off beginning in August and accelerating through the fall. However, the lofty magnitude of the record high prices in July this year are likely contributing to a steeper decline in recent weeks then would normally be experienced.

The national average negotiated carcass price for direct delivered hogs on today’s morning report was $112.32/cwt. This is down $4.59 from last week and $14.88 lower than three weeks ago, but still up $15.44 vs. a year ago. Both the western corn belt and Iowa-Minnesota averaged $112.63/cwt this morning, with the eastern corn belt average price at $112.26/cwt. Both Peoria and interior Missouri live hogs had a top price today of $83/cwt.

Pork cutout values also fell this week, with today’s cutout value at $125.91/cwt FOB the plants, down $1.07 from last Friday. Pork bellies were the only primal cut to show an increase on the week, up 6.3% following last week’s large decline. The cutout is still $20.04 (18.9%) above a year ago. This morning’s hog carcass price equaled 89.2% of the pork cutout value, a decline of about 3% relative to recent weeks.

Hog slaughter totaled 1.919 million head this week, up 2.8% from the week before and the highest total in 9 weeks. Slaughter numbers were down 5.2% from the same week last year. The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 283.6 pounds, down 0.1 pounds from the week before, but 12 pounds heavier than the same week last year. For the 12th consecutive week weights were at least 10 pounds heavier than a year ago.

The September corn futures contract gave up gains from early in the week to close at $3.52 per bushel today, unchanged from a week ago. The August Crop Production report will be released next Tuesday, providing the first USDA estimates of 2014 corn and soybean crop sizes derived by using objective yield data.

Russia announced a ban on all food imports from the U.S. this week. Pork exports to Russia accounted for 5.4 percent of total U.S. pork exports during May and June 2014, after being virtually zero from March 2013 through April 2014 due to concerns over ractopamine. Beef exports to Russia have been negligible since late 2012, but chicken shipments to Russia have accounted for roughly 7 percent of the U.S. total in recent history.

Hog futures were again lower this week. The August hog futures contract ended the week at $114.22/cwt, down $3.80 from the previous Friday. October hogs lost $3.50 this week to close at $99.32/cwt. The December contract ended the week at $89.15/cwt down $5.25 for the week. The February lean hog contract settled at $87.90/cwt.

Source: AGEBB