August 13, 2009
US August pork complex woes an about face from yearago
Serious financial issues facing the US pork industry in early August illustrate a reversal from numerous record highs hit about this time a year ago.
Wholesale pork prices hit an all-time high a year ago this week at US$94.41 per hundredweight. One week earlier, the average weight for barrows and gilts in Iowa/southern Minnesota hit the year's low at 257.4 pounds. In addition, pork exports throughout the summer of 2008 were still surging, although off the record monthly figure hit in May at 196,118 tonnes, according to the US Meat Export Federation's Web site database.
The numerous bullish factors that drove hog and pork prices up last year have been lacking this summer, especially in recent weeks.
Pork export tonnage, including pork variety meats, in May and June this year averaged nearly 30 percent below a year ago, USMEF data show. The total for the first half of the year was down 9 percent by volume. The economic crisis and concerns over AH1N1 influenza have contributed heavily to the slowed export sales, said industry analysts.
Unusually mild temperatures during July along with feed costs only about half of what they were a year ago for that period resulted in heavier hog weights.
The animals eat more when temperatures are moderate to cool, therefore they gain weight faster. And, producers are generally willing to keep them a little longer when feed costs are cheaper.
The result has been a counter-seasonal rise in hog weights in the Midwest during mid-summer. The US Department of Agriculture reported the average weight for barrows and gilts last week in Iowa/southern Minnesota at 267.8 pounds, which put the latest figure up 10.4 pounds from the year-ago figure. That year-on-year spread was a new record.
The additional pork produced from the heavier hogs amounts to nearly 8.0 pounds per head and puts more downward pressure on wholesale pork prices.
The USDA's pork carcass value Tuesday fell US$1.05 per hundredweight then declined another US$1.34 on Wednesday to a five-week low. The latest quote was just 58.4 percent of the year-ago figure.
Lean hog futures prices have fallen along with the fundamentals. The spot August lean hog contract Wednesday hit new contract low for the seventh consecutive day while most-active October did so for the sixth time in the last seven days. Both closed at life-of-contract lows.
