Highlights

US$22.70/head loss in December, January loss at US$33/ head   Liquidation of breeding animals at small-mid sized operations   Meat production for the week up 6.7 percent on-year   Weekly hog slaughter up 8.9 percent from year-ago

January 28, 2008

 

US hog markets rally, but producers still face losses

 

 

The US cash hog market turned firmer this week, and on Friday (January 28, 2008) the USDA's national weighted average price hit a 5 1/2-week high.

 

While cash prices for the month to date have averaged about US$4 per hundredweight on a dressed basis below the December mean, the market has recovered nearly US$6.50 from this month's low hit on Jan. 8.

 

February lean hog futures prices have rallied from the contract low hit two weeks ago. The front month closed Friday at 56.20 cents per pound, up 123 points on the week.

 

Pork producers who did not have price-protection measures in place lost approximately US$22.70 per head in December, according to breakeven calculations by John Lawrence, agricultural economist at Iowa State University.

 

Higher feed costs combined with lower hog prices put the losses so far for January at about US$33 per head.

 

Market analysts and livestock dealers said that some liquidation of breeding animals is occurring due to the significant losses and an outlook for high feed costs to continue. Most of the cutbacks have come from mid-size and smaller operations, according to the anecdotal reports.

 

As steep as the losses have been for producers in the past two to three months, were it not for strong demand they would have been even worse, said Glenn Grimes, agricultural economist at the University of Missouri.

 

Grimes said preliminary data show consumer demand for pork in 2007 was up 2.6 percent from 2006. If live hog demand had been flat, cash hog prices could have declined about 18 percent further than they did, he said.

 

Demand for beef and live cattle in 2007 also were up from 2006, Grimes said. The preliminary data show the beef demand index was up 0.8 percent, while demand for live cattle was up 3.5 percent.

 

The stronger demand for both of the meat categories has helped pull the large supplies through the distribution system.

 

Both cattle and hog slaughters for last week were higher than a year ago, with cattle up from 631,000 heads to 640,000 heads and hog up from 2.0 million to 2.3 million. 

 

Year-to-date slaughter for cattle, at 2.353 million head, was down 1.0 percent from a year ago, while year-to-date hog slaughter was estimated at 8.8 million head, up 8.9 percent from a year ago.

 

Combined beef/veal, lamb and pork production this week was estimated at 975.2 million pounds, compared with 913.5 million a year ago, up 6.7 percent.