Year-on-year declines in weekly US hog slaughters narrowing

 

Year-on-year declines in US hog slaughters have narrowed in the latest three weeks, contributing to a more cautious near-term outlook for hog and pork prices.

Weekly slaughter totals throughout January and the first half of February were running well behind projections that had been based on the December hogs and pigs report.

Data showed hogs kept for marketing as of December 1 at an average of 98% for the four weight categories. The USDA's actual slaughter data for the first seven weeks of 2010, however, averaged 5.0% below a year-ago.

Industry analysts and livestock dealers said numerous weather interruptions to processing schedules during the winter along with slowed weight gains due to poor quality corn contributed to reduced slaughters at that time.

Slaughter totals are in a slowly declining trend in absolute terms, but year-on-year comparisons show the latest three weeks have crept to within about 1.3% of a year ago compared with a 5% shortfall during the first seven weeks of the year. The decline is less than the 2% projected by the December hogs and pigs report.

Ron Plain, agricultural economist at the University of Missouri, said some people speculate that the slower growing hogs did not reach slaughter weight in the normal number of days, and some of those animals were likely held on the farms a while longer until they hit the desired weight. That could have resulted in delayed marketings and contributed to the bigger-than-expected slaughters during the latest three weeks.

He said that many of the large operations, however, do not have much flexibility on when to ship and must move the hogs out to make room for the next batch of pigs scheduled to come in. Many of these units use an all-in, all-out method meaning that all animals in the barn are shipped out and the facility cleaned before the next group of pigs arrives. This does not allow any extra time for the slower growing pigs to reach the desired weight, they are sold anyway.

Plain predicts that weekly slaughter totals will stay below a year ago but the deficit may remain narrow for a few more weeks.

Some brokers and analysts expect hog and wholesale pork prices to be about flat to narrowly mixed through the balance of March. They also said there could be increased buyer caution for hogs by packers and for pork by retailers.

Wholesale pork prices through Thursday have gained US$6.72 per hundred pounds, or 10%, since Dec. 31 and are up nearly 30% from a year ago. Cash hog prices, using USDA's national weighted average quotes, have risen US$8.25 on a dressed basis, or 13%, so far this year.