US pork supplies seen to tighten; prices move up
US pork supplies are tightening and prices are moving up, according to some analysts.
Western corn belt cash hog carcass prices averaged US$81.80/cwt on Saturday (April 17), the highest since August 2008. USDA’s Thursday afternoon calculated pork cutout value was US$85.25/cwt, up US$5.94 from the previous Thursday, up US$12.97 from 3 weeks ago, and up US$23.34 compared to the same day last year. Loins, hams and pork bellies were all more than US$5 higher again this week. The current pork cutout is also the highest since August 2008.
According to John Lawrence at Iowa State University, he has long maintained an estimate of hog farm profitability. His numbers indicate that the typical farrow to finish operation turned a profit in March of US$8.84/head. This was the first profitable month since August 2008. John estimates current breakeven at between US$51/cwt and US$52/cwt of live weight. Over the last two and half years, hog producers have lost more than US$6 billion.
Analysts said both export demand and live hog demand are up, but domestic retail pork demand remains below year-ago levels. The average retail price of pork in March was US$2.914 per pound, down 0.3 cents from February and 2.8 cents lower than in March 2009.
March live hog prices averaged US$52.43/cwt, up US$3.45 from February and up US$9.96 from March 2009. Margins for middlemen are being squeezed. The March farm-to-retail price spread for pork was the tightest since August 2008. Either retail pork prices move higher, or hog prices will be forced back down. Meat supplies are tight, so retail pork prices should move up. The question is whether the economy is strong enough to sustain higher grocery store prices.
The national weighted average carcass price for negotiated hogs Friday morning was US$79.96/cwt, US$6.27 higher than the previous Friday. Regional average prices on. Last week’s hog slaughter totalled 2.032 million head, up 0.7% from the week before, but down 4.3% compared to the same week last year. Year-to-date pork production is down 5%.
Meanwhile, May lean hog futures contract ended the week at US$86.42/cwt, up US$2.55 earlier the previous week. The June contract settled at US$86.15, up US$1.78 for the week. July closed the week US$1.63 higher at US$86.20/cwt and August ended the week US$86.25/cwt. The May to August price range is unusually flat.
May corn futures gained 18.25 cents this week and settled at US$3.64 on Friday. The July contract ended the week at US$3.74, up 16.75 cents per bushel from the previous Friday.
