Ron Plain: Hog Outlook

Sep 05, 2014
By Ron Plain
Assistant Editor, North American Content,

Ron Plain and Scott Brown
University of Missouri

Zoetis announced this week they have a conditional license from USDA for a new PEDV vaccine. Sales of the vaccine are expected to begin later this month. The killed vaccine is administered in two doses to pregnant sows and gilts to boost antibodies in the colostrums and hopefully prevent piglet death from PEDV. As should be expected, the news was a drag on deferred hog futures prices. The effectiveness of the vaccine is questionable, especially in sows that have not had PED. But, this is another step forward in the effort to control of this devastating disease. Harrisvaccines received a conditional license for their PEDV vaccine in June.

After 7 weeks of price decline, the national average negotiated carcass price for direct delivered hogs on the morning report today, $95.22/cwt, is up $4.66 from last week and up $8.62 compared to a year ago. The eastern corn belt average price this morning was $92.44/cwt. The western corn belt averaged $98.06/cwt and Iowa-Minnesota's morning average hog price was $98.09/cwt. Peoria had a top live price today of $64/cwt. Interior Missouri live hogs had a top price of $64.50/cwt, down $1.50 compared to last Friday.

The pork cutout value was also higher this week. This morning's cutout was $102.82/cwt FOB the plants, up $1.20 from last Friday and up $7.88 above a year ago. This morning's hog carcass price was 92.6% of the cutout value.

A rare event is occurring: ham prices are currently above belly prices. On this morning's report, wholesale hams were worth $101.83/cwt and bellies were worth 100.86/cwt. This is BLT season when bellies are usually close to their yearly high. This year, the peak in bellies prices was $203.53/cwt on April 7. At that time there was fear that the PEDV would create a pork shortage and we would run out of bacon this summer. A lot of bellies were put in cold storage this spring and that became a drag on belly prices this summer.

This week's hog slaughter totaled 1.78 million head, down 10.1% from the week before due to Monday's Labor Day holiday, and down 10.2% from the same week last year. Hog slaughter has been down more than 7.0% for 8 of the last 10 weeks.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 280.6 pounds, down 1.5 pounds from the week before, but 10.4 pounds heavier than the same week last year. This was the 16th consecutive week with weights at least 10 pounds heavier than a year ago.

Hog futures were higher this week. The October hog futures contract ended the week at $105.62/cwt, up $7.50 from the previous Friday. December hogs gained $3.45 this week to close at $95.45/cwt. The February lean hog contract settled at $91.42/cwt, a gain of 60 cents. The big gain by the October contract plus its large premium over the cash market makes us optimistic about cash hog prices gaining more next week.

Source: AGEBB