November 14, 2005

 

Recent big US hog slaughters raise some expansion concerns

 

 

US weekly hog slaughters since the last week of September have averaged about 1.8 percent above a year ago, which has some market analysts wondering if there had been a little more expansion than expected in the breeding herd and pig crop last winter and spring.

 

The USDA's weight breakdown for market hogs in the latest quarterly survey, which was as of Sept. 1, showed hogs weighing over 180 pounds at 98.0 percent of a year ago and the next two lighter-weight categories at 101.0 percent.

 

The hogs that went to slaughter during October and so far in November would have come mainly from the categories estimated at 101 percent as of Sep 1.

 

Therefore, about 0.8 percent, or roughly 16,600 head a week, more hogs have gone to slaughter during the latest seven weeks than had been expected, according to the USDA's September quarterly survey.

 

An extended period of profitable prices and generally low feed costs are factors that typically result in expanded production. Prices have been at profitable levels for most producers for 21 consecutive months.

 

Ron Plain and Glenn Grimes, agricultural economists at the University of Missouri, said in their weekly hog outlook report issued Friday that based on the USDA's projected corn and soymeal prices for 2006, feed costs will be lower than in 2005.

 

"The USDA price estimate for corn for the current year is for a midpoint estimate of US$1.80 per bushel, down US$0.05 per bushel from the October estimate. This compares with a 2004-2005 marketing year average farm price for corn at US$2.06 per bushel," the economists said.

 

The USDA's forecast for the current marketing year's soybean meal price is US$172.50/tonne, down approximately US$20.50/tonne from the 2004-05 marketing year, they said.

 

Lower feed prices will be positive for feeder pig prices and will reduce the total cost of producing hogs by about US$1.25 per hundredweight for average-cost producers, Plain and Grimes said.

 

Demand for hogs at the live level has slipped in the latest six months compared with 2004, when it was very strong and low-carbohydrate diets were widely popular. Plain and Grimes said demand for live hogs in the July-September quarter this year was down about 4 percent from a year ago and was the poorest showing for the year to date. "The odds probably favour a weaker live hog demand in 2006 than in 2005," they said.

 

The two economists along with a number of other market sources contacted this week recommend that producers consider locking in prices for 2006 on a portion of their production since current futures prices would result in an average price for the year above US$45 on a live basis.

 

The current breakeven level for average cost producers is around $39.00 live, according to the 'estimated livestock returns' Web site of John Lawrence, agriculture economist at Iowa State University.

 

 

CATTLE/HOG SLAUGHTERS

 

The USDA did not release slaughter or meat production data Friday due to the Veterans Day holiday. Those figures will be available Monday afternoon.

 

As of week-ended Nov 4, year-to-date cattle slaughter was down 1.9 percent from a year ago, and year-to-date hog slaughter was down 0.3 percent from last year. The combined meat output for the year through that date was 38.133 billion pounds, nearly unchanged from 38.129 billion a year ago.