Ron Plain: Hog Outlook

Aug 15, 2014

Hog Outlook

Ron Plain and Scott Brown
University of Missouri

Domestic pork demand continues to increase. Retail demand was up 3.8% in June. Over the last 12 months, domestic pork demand is up 5.4%. Export demand for U.S. pork is even stronger. Pork export demand was up 13.4% in June. Over the last year, export demand for U.S. pork is up 12.8%.

Live hog imports during the first half of 2014 were down 8.2% with 179,779 fewer feeder pigs and 34,436 fewer other hogs imported.

USDA's August crop report predicted the nation's 2014 corn harvest will exceed 14 billion bushels for the first time ever. The soybean harvest is expected to come in at 3.816 billion bushels, up 457 million bushels from 2009's record. More production means lower prices. USDA is currently forecasting the season average corn price will fall between $3.55 and $4.25 per bushel. They expect soybean prices to average between $9.35 and $11.35 per bushel.

USDA made a very slight increase in their forecast of 2014 pork production, but left their hog price forecast unchanged. For the year, USDA expects barrows and gilts to average close to $80/cwt on a live weight basis.

Hog carcass prices have declined by $26/cwt in the last five weeks. During the same period, the pork cutout value is down $31/cwt. The drop is mostly due to a steady increase in hog slaughter. This was the fourth consecutive week with hog slaughter larger than the week before and the first week with slaughter above 2 million head since the week ending on May 10.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $102.76/cwt. That was down $9.56 from last week, but up $6.85 compared to a year ago. The eastern corn belt's morning average price was $102.77/cwt. Neither the western corn belt nor Iowa-Minnesota had a morning price report today. Peoria had a top today of $75/cwt. Interior Missouri live hogs had a top price of $77/cwt.

The pork cutout value took a big drop this week, with today's cutout at $113.29/cwt FOB the plants, down $12.62 from last Friday. Loins, butts, hams and bellies were all lower. The cutout is $10.38 above a year ago. This morning's hog carcass price equaled 90.7% of the pork cutout value.

This week's hog slaughter totaled 2.017 million head, up 5.1% from the week before, but down 7.7% from the same week last year. The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 283.8 pounds, up 0.2 pound from the week before and 12.6 pounds heavier than the same week last year. This was the 13th consecutive week with weights at least 10 pounds heavier than a year ago.

Hog futures also were lower this week. The October hog futures contract ended the week at $94.95/cwt, down $4.37 from the previous Friday. December hogs lost 10 cents this week to close at $89.05/cwt. February hogs ended the week at $87.35/cwt.

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