May 12, 2008

 

US hog producers reacting to high corn prices

 

 

Declining hog weights in Iowa/southern Minnesota, compared with a year ago, along with increased sow slaughters during the past five weeks show producers are reacting to record-high corn prices.

 

The average weight for barrows and gilts last week in Iowa/southern Minnesota, which is the largest hog-producing region in the country, was reported at 263.7 pounds. That was down 0.9 pound from the previous week and 4.0 pounds below a year ago. The lighter weights are the result of a concerted effort by producers to ship the animals to market sooner than normal and reduce their overall feed costs, according to market analysts and livestock dealers.

 

CBOT corn prices hit new contract highs on Friday with the new-crop September hitting US$6.47 per bushel and December reaching US$6.55 before both sold off their new highs.

 

Corn at US$6.50 per bushel with soymeal approaching US$350 per short ton would put the breakeven price for hog producers around US$65 per hundredweight on a live basis, according to John Lawrence, agricultural economist at Iowa State University.

 

When hog prices are below the cost of gain, producers can reduce their losses by selling the animals earlier and save on feed.

 

The 4.0-pound difference in carcass weights from a year ago reduces the total tonnage of pork produced. A four-pound change in live weights will result in about three pounds less pork to be produced per head. If the declines in carcass weights extend to all hogs, it would mean about 6.3 million pounds less pork per week on a 2.1-million-head slaughter.

 

The lighter hog weights indicate that supplies are more current and that fewer animals may be available to packers for slaughter.

 

Seasonally smaller hog supplies, lighter carcass weights and strong demand have helped drive up cash prices. In the past seven weeks, the US Department of Agriculture's national daily weighted average hog prices have advanced more than US$28 per hundredweight, or nearly 58 percent.

 

Producers are also reducing their breeding herds by deeper culling of sows and not holding back as many gilts, or young females, to be added to the breeding herd.

 

The USDA's sow slaughter data for the latest five weeks show an average increase of 15.3 percent from the same period a year ago. The increase in sow slaughter per week since early April has been about 9,500 head.

 

The pork carcass value Friday was reported at US$78.77, up US$3.58 for the week. Since April 1, when the cutout hit a 51-month low at US$54.87, wholesale pork prices have surged US$23.90, or nearly 44 percent.

 

The USDA estimated total beef, pork and lamb production for the week at 960.4 million pounds. Last week's output was 976.9 million pounds, and the year-ago figure was 900.6 million pounds. Year-to-date combined meat output is up 6.1 percent.