September 8, 2008
US hog, pork markets search for stability amid uncertainty
US cash hog and wholesale pork markets are searching for stability amid uncertainty about demand, particularly in the export markets, which have supported prices throughout the year.
Market analysts, brokers and livestock dealers said the latest two weeks have been especially trying periods for the pork industry. Hog producers have seen prices for their animals tumble by more than US$10 per hundredweight on a dressed basis, or approximately 13 percent since August 22. That amounts to about US$20 per head on slaughter-ready hogs. The good news for producers - temporarily at least - is that cash prices have rallied the past three days to soften the earlier steep slide, they said.
Wholesale pork prices have declined by US$11.59 during the same period and are off US$17.14, or 18.2 percent, from the record high hit on August 15. Friday's cutout quote was up US$0.07 and broke a string of 13 consecutive lower days.
Analysts said seasonally expanding hog supplies and concerns that pork sales to key international customers such as Mexico, Russia and China/Hong Kong may not be as brisk during the remainder of the year as they were through the first seven or eight months could further weigh on hog and pork prices.
Some meat brokers and analysts also said lower-than-expected chicken-breast prices could cut into sales of pork at a critical time of heavy production during the autumn.
Calculated producer break-even prices for hogs as of August at farrow-to-finish operations in Iowa were US$60.66 per hundredweight on a live basis, according to John Lawrence, agricultural economist at Iowa State University. The Dow Jones Newswires' live hog equivalent price, which is based on the US Department of Agriculture's national weighted average dressed hog market reports, hit a summer high of US$65.56 on Aug. 8 then slid to US$52.35 by the end of the month. It fell to US$51.63 on Tuesday before rebounding over the balance of the week to US$54.02 Friday.
The normal seasonal trend for hog prices is weaker into the autumn, but the market tends to make short-term corrections from time to time. This week may be one of those times when prices rebound a bit, but whether it happens or not could depend upon the continued flow of pork exports, analysts said.
Cattle slaughter was estimated at 590,000 head, compared with 680,000 a week ago and 606,000 a year ago. Year-to-date cattle slaughter is up 0.7 percent from a year ago.
Last week's hog slaughter was estimated at 2.055 million head, compared with 2.218 million last week and 1.932 million a year ago. Year-to-date hog slaughter is up 8.8 percent.
The USDA estimated total beef, pork and lamb production for the week at 866.0 million pounds. The other week's output was 967.8 million pounds, and the year-ago figure was 866.4 million pounds. Year-to-date combined meat output is up 4.5 percent.
