June 21, 2006

Recent surge puts US cash hog prices highest since December 2004
 

US cash hog prices have surged since late May and are now at their highest levels since early December 2004.

The US Department of Agriculture reported its national daily weighted average price Monday afternoon at US$79.62, the highest since Dec 3, 2004.

Industry sources and market analysts have cited multiple factors coming together at one time to drive the unexpectedly strong rally in slaughter hog prices. These include breeding problems late last summer, disease losses last fall and winter, increased export sales so far in 2006, and new slaughter capacity added early this year. Also, sources said packers are competing for the hogs that are available in order to maintain their market shares.

Very hot temperatures across much of the heaviest hog production areas of the country last July and August caused breeding problems on swine farms. The heat presents problems for sows and boars alike, and industry sources said many sows did not "settle," or become pregnant, after being bred. Although producers typically increase the number of sows and gilts to be bred during the hottest portion of the summer to offset the decline in successful breedings, last summer was hotter than normal, and it took a toll on producers, the sources said.

There have been reports of increased death losses in growing pigs last fall and winter from Post-weaning Multisystemic Wasting Syndrome, or PMWS, which is caused by a circo-virus. Industry sources said there were also more severe losses when the PMWS virus was found along with the Porcine Reproductive and Respiratory Syndrome, or PRRS, virus.

US pork exports for the first four months of this year were up about 13 percent from a year ago, and market sources stated it is likely that the exports have remained strong and have thus contributed to the good demand from packers for the hogs that are available.

In addition, producers may have become more concerned in early May about hog prices for the summer along with expectations of higher feed costs later this year, which may have encouraged them to sell the hogs sooner at lighter weights. At that time, weekly slaughters were running slightly above a year ago.

However, by late May, packers found supplies of slaughter-ready hogs not as readily available as they had expected, and the plants became more aggressive buyers, sources said. Hog weights declined even further, pulling the average down to 2.5 pounds below a year ago in Iowa/southern Minnesota, as of the government's latest report for the week ending June 9.

The terminal markets, which trade on a live basis, reached US$60 or more on Monday at the four western locations, with an extreme top of US$63, also the highest since early December 2004. Prices in early trading Tuesday were mostly higher again, with the Sioux Falls, S.D., market reported at US$64. These markets are on the brink of challenging their all-time highs hit in May 1990 at US$67 to US$67.50.