Ron Plain: Weekly Hog Outlook

International pork trade is going well. During the first half of 2011 U.S. pork exports were up 15.2% and pork imports were down 1.8% compared to a year ago. The top four foreign markets for U.S. pork are Japan, Mexico, South Korea and Canada. During January-June we exported 22.2% of U.S. pork production and imported an amount equal to 3.6% of production. June U.S. pork exports were up only 2.3% compared to a year ago. That is the smallest year-over-year increase since October. June pork imports were down 16.2% compared to a year ago. There is a lot of optimism about the potential that China will buy a lot of U.S. pork in coming months. Their purchases during June were triple that of 12 months earlier.

Iowa State University calculations estimate the typical Iowa farrow to finish operation had a profit of $15.58 per market hog sold during July with a cost of production of $67.34/cwt of live weight. For the first 7 months of 2011, hog prices are $10/cwt live weight above year earlier, but because of higher feed costs profits per head are $10 lower.

The pork cutout value declined this week for the first time in seven weeks. USDA's Thursday afternoon calculated pork cutout value was $106.93/cwt, down $2.50 from the previous Thursday. Loins, hams and belly prices were lower this week, butt prices higher.

The national average negotiated carcass price for direct delivered hogs on the morning report today was $99.75/cwt, down $2.81 from last Friday. The Friday morning price report for the western corn belt was $98.94/cwt. The eastern corn belt averaged $98.94/cwt. There were not enough negotiated hogs sells in Iowa-Minnesota for a morning price report. Friday's top live hog price at Peoria was $67/cwt. Zumbrota's top was $71/cwt. The top for interior Missouri live hogs was $74.25/cwt, up 75 cents from the previous Friday.

Hog slaughter totaled 2.046 million head this week, up 0.6% from last week, but down 1.4% compared to the same week last year. Barrow and gilt slaughter is running 1.5% under the level implied by the June hogs and pigs report. Barrow and gilt carcass weights for the week ending August 6 averaged 195 pounds, down 1 pound from a week earlier and down 2 pounds from a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged 261 pounds, up 0.2 pound from the week before, down 4.6 pounds compared to the same week last year. This is the twelfth consecutive week Iowa-Minnesota weights have been below the year-earlier level. Look for both slaughter weights and daily hog slaughter to increase as we move closer to fall.

Today's close for the October lean hog futures contract, $88.37/cwt, was down $1.10 from last Friday. Today, the December lean hog contract settled at $84.87/cwt, down $1.33 from the previous Friday. The February lean hog contract settled Friday at $87.55/cwt, down $1.02 for the week.