US hog prices go downward

 

 

It was not a good week for hog producers as pork cutout and hog prices reversed their upward trend and dropped last week, according to reports.

 

Loins, hams, bellies, and boston butts were all lower this week. The pork cutout ended 2009 at US$67.39/cwt. By January 20, it had reached US$78.63/cwt, the highest pork cutout since September 2, 2008.

 

USDA's Thursday (Jan 28) afternoon calculated cutout value was US$69.24/cwt, down US$8.11 from the previous Thursday. At this time last year, the pork cutout was only US$57/cwt.

 

The 21% year-over-year improvement in cutout value is not uniform across pork cuts. Wholesale prices of ribs are up 15% and loins are up 9% compared to January 29, 2009. Wholesale ham prices are up 58%. As is often the case during a recession, lower cost cuts of meat do better than higher cost cuts.

 

Hog bids on a carcass basis were sharply lower this week. The national weighted average carcass price for negotiated hogs Friday morning was US$62.23/cwt, US$5.18 lower than the previous Friday, but US$5.77/cwt higher than a year ago.

 

Regional average prices on Friday morning were: eastern corn belt US$62.28, western corn belt US$61.57, and Iowa-Minnesota US$61.77/cwt. The top hog price Friday at Sioux Falls was US$45.50/cwt.

 

The government earlier announced that the nation's GDP grew by 5.7% during the final quarter of 2009. Much of the growth was due to stopping the decline in inventories.

 

According to reports, if the economy continues growth, it will eventually lead to lower unemployment levels and should give a stronger meat demand. This year's hog slaughter is expected to be 4-5% lower than in 2008.

 

Hog carcass prices averaged US$63/cwt in 2008. Pork supplies are declining, but better demand is needed to push hog prices back above breakeven.

 

This week's hog slaughter is estimated to be 2.142 million head, down 4.8% compared to the same week last year. Since December 1, slaughter of US raised barrows and gilts has been roughly 2.4% below the level implied by USDA's December inventory survey. Part of this decline is undoubtedly due to bad weather.

 

The average carcass weight of barrows and gilts slaughtered the week ending January 16 was 201 pounds, 1 pound lighter than the same week last year. Iowa-Minnesota live weights last week averaged 269.9 pounds, up 0.9 pounds compared to a year earlier.

 

The February lean hog futures contract ended the week at US$66.50/cwt, down US$3.35 from the previous week. Today the April contract settled at US$68.60, off US$3.37 for the week. May closed the week at US$73.65/cwt and June ended at US$76.72/cwt.