Ron Plain: Hog Outlook - USDA Hog Inventory.

Hog Outlook

Ron Plain and Scott Brown
University of Missouri

USDA's September hog inventory survey gives much the same outlook at the June survey. My current forecast of 2015 hog slaughter is 110.606 million head. That is 49,000 head higher than my prediction following the June hogs and pigs report. Although the September hog inventory came in a bit higher than the average of trade forecasts, but it didn't have much impact on futures prices. Hog futures had a mostly uneventful week and ended mixed. The October hog contract ended the week at $105.60/cwt, down 92 cents from the previous Friday. December hogs lost $1.45 this week to close at $93.02/cwt. The February lean hog futures contract settled at $90.65/cwt, a gain of $1.15 from the previous Friday. April hogs ended at $91.30/cwt.

Today's jobs report said 248,000 jobs were added to the U.S. economy during September. That's the biggest number since June and is a sign of economic growth which should be positive for domestic meat demand.

The U.S. dollar has strengthened against foreign currency for 12 consecutive weeks. That is good news for importers, but bad news for U.S. exports. U.S. agriculture is a big exporter.

Most year-over-year price comparisons are absent from today's report because there were almost no USDA market reports issued during early October of last year due to budgetary disputes that caused a partial shutdown of the federal government.

Hog prices were higher again this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $104.11/cwt, up $2.81 from last week. There was no morning price quotes today for the eastern corn belt, the western corn belt or Iowa-Minnesota. Peoria had a top live price today of $72/cwt and interior Missouri's live top today was $76.25/cwt which is $1.25 higher than last Friday.

The pork cutout value moved higher for the fifth consecutive week. This morning's cutout was $124.43/cwt FOB the plants, up $4.26 from last Friday. This morning's hog carcass price was only 83.7% of the cutout value, which should be supportive for next week's hog price bids.

This week's hog slaughter totaled 2.09 million head, down 0.2% from the week before and down 5.8% from the same week last year. Hog slaughter has been below the year-ago level for the last 32 weeks.

The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 284.6 pounds, up 1.7 pound from the week before and 11.0 pounds heavier than the same week last year. This was the 20th consecutive week with weights at least 10 pounds heavier than a year ago. Year-to-date hog slaughter is down 5.3% but because of heavier weights, pork production is down only 1.7%.

Corn futures ended the week largely unchanged from the previous Friday. December corn closed at $3.2325 per bushel and March corn settled at $3.3625 per bushel.