May 25, 2009

US cash hog prices fell about US$6 per hundredweight or nearly 10 percent last week on slow packer demand ahead of the Memorial Day weekend.

 

The losses wiped out most of the hefty gains made the previous week, and Friday's national weighted average price reported by the US Department of Agriculture was a two-week low.

 

Market analysts said interruptions in export sales to Russia, Mexico and several other countries during the past four weeks have weighed on pork and hog prices. Mexico was the leading international customer of US pork and pork variety meats by volume during the first quarter while Russia ranked sixth. According to meat exporters, brokers and industry insiders, sales to each of these two countries have declined sharply since late April when outbreaks of AH1N1 influenza occurred. The influenza was first called swine flu because the virus causing the disease contains genetic information from three forms of influenza - swine, human and birds.

 

Concerns about eating pork or handling hogs were influenced by reports labeling the disease as swine flu, analysts and industry participants said. Health organizations, who now refer to the disease as AH1N1, say properly handled and cooked pork is safe.

 

Demand for pork, however, has been slow to recover in some countries such as Mexico where several people were killed by the disease.

 

In addition to the softened pork demand, Monday's holiday is weighing on hog prices because packers don't need to buy as many animals for next week.

 

Market analysts said additional losses taken by producers who did not have risk management systems in place could cause some of them to leave the hog business altogether. Prices normally rise in May on stronger demand and smaller supplies.

 

Cash hog prices at the end of this week were only around 73% of a year ago, and producers needed to be making a profit during the second quarter to help offset losses that have occurred since September 2007, analysts said. The outlook for hog and feed-grain prices this summer suggests that pork producers may break even at best during the third quarter before hog prices are expected to erode again through autumn.

 

Early in the day Friday, USDA released livestock slaughter and meat production figures for April. Beef and pork output were both down 5 percent from a year ago. For the first four months, beef output was shown down 3 percent, pork off 4 percent and combined meat output down 3 percent from the same period in 2008. Heavier carcass weights have partially offset lower slaughter rates for cattle and hogs.

 

Last week's cattle slaughter was estimated at 678,000 head, compared with 672,000 a week ago and 721,000 a year ago. Year-to-date cattle slaughter is down 6.0 percent from a year ago.

 

The week's hog slaughter estimate was 2.057 million head, compared with 2.076 million a week ago and 2.101 million a year ago. For the year, hog slaughter is off 4.9 percent.

 

The USDA estimated total beef, pork and lamb production for the week at 944.0 million pounds. Last week's output was 945.6 million pounds, and the year-ago figure was 973.3 million pounds. Year-to-date output is down 4.4 percent.

 

Broiler/fryer slaughter for the week was estimated at 162.141 million head, compared with 159.312 million a week ago and 167.881 million a year ago.