July 16, 2007

 

US hog prices may struggle to recover to seasonal price levels

 

 

US hog prices maintained a close relationship through June to seasonal moves, but the trend changed a week ago when prices dropped below the seasonal line.

 

Market analysts said Friday (July 13) that the hog prices could have a hard time recovering because supplies appear to be rising, although some traders were viewing the move as an anomaly, according to the Chicago Mercantile Exchange's Daily Livestock Report.

 

Market analysts contacted by Dow Jones Newswires gave two reasons for the price pressure on hogs. One was the success of circovirus vaccine and the resulting higher populations of hogs currently near the end of their time on feed. The other was the pressure that resulted from hard declines in ham prices.

 

Bob Brown, a private market analyst, said ham prices this spring and summer "cratered" and only stabilized this week. This, coupled with a very large slaughter in May, resulted in a big in-movement of hams into cold storage in May.

 

Ham demand from Mexico also is down this year, he said, and while export demand for hams could rise, there is no indication that anything is about to change along these lines.

 

As a result of the lower product value, packing plant margins over the last two weeks "were horrible," Brown said. Packers responded by trying to trim slaughter rates and were partially successful in curbing losses.

 

Robin Fuller, president of Tallgrass Consulting, said she did not expect a rebound in hog prices to catch up with the seasonals. There are too many hogs ready to come to market, she said.

 

With the vaccine, the industry is beyond circovirus problems, and now must figure out a way to move the hogs through the pipeline. And unless there is a protracted heat wave to increase death losses the pipeline is going to have to be greased with lower prices.

 

But that doesn't mean the hog market will fall apart. Fuller said she just thinks there won't be a rebound. Product markets appear to be stabilizing at current prices with loins and butts moving higher to support hog values, she said.

 

US cattle slaughter for the week was estimated at 672,000 head, compared with 582,000 a week ago and 694,000 a year ago. Year-to-date slaughter stands at 17.984 million head, up 1.4 percent from a year ago.

 

The USDA estimated this week's hog slaughter at 1.945 million head, compared with 1.645 million a week ago and 1.943 million a year ago. The year-to-date total is 55.312 million head, up 2.2 percent from a year ago.

 

The USDA estimated total beef, pork and lamb production for the week at 908.6 million pounds. Last week's output was 778.3 million pounds. The year-ago output was 929.8 million pounds. Year-to-date combined meat output is 24.017 billion pounds, up 0.9 percent from last year.

 

Broiler/fryer slaughter for the week was estimated at 148.315 million head, compared with 166.260 million a week ago and 139.425 million a year ago.