November 30, 2009

 

US hog prices ride unusual rally in Thanksgiving holiday week

 

 

Cash hog prices rallied sharply this week, unusual during the reduced slaughter schedules of the Thanksgiving holiday period while the pork cutout value climbed and on Friday (Nov 27) hit a four-month high.

 

Analysts and livestock dealers said price gains late in the week of Thanksgiving aren't uncommon on buying to fill the large weekend slaughter schedules. The strength often seen on the Friday after Thanksgiving, however, is normally not enough to offset the declines that usually take place at the beginning of the week. This week was an exception to the normal trend in that prices were stronger from the outset.

 

The US Department of Agriculture's national weighted average hog price Friday afternoon was US$56.11 per hundred pounds, an increase of US$4.80 for the week.

 

Market analysts and livestock dealers said a modest tightening of slaughter-ready hog supplies since late summer has contributed to the upturn. In addition, some producers reportedly sold additional loads last week to prevent a backlog of animals on the farms during the holiday-shortened week. The rapid rise in prices may have caused some producers who had earlier intended to sell additional hogs late this week to wait until next week instead.

 

In addition, expectations of smaller supplies and higher prices into 2010 seem to have generated more buying interest from speculators and possibly some meat processors. Speculators in meats buy certain cuts if they consider the price to be right then hold the product in cold storage with the expectation of selling at a higher price to turn a profit.

 

With wholesale pork prices coming off a 6 1/2-year low in August and smaller hog supply expectations for next year, speculative buying could help boost wholesale pork prices this fall and winter, analysts said.

 

The USDA reported the pork carcass composite value Friday at US$61.87 per hundred pounds, up US$3.66 from last week and US$4.49 higher than two weeks ago. The latest cutout value was 5.8-percent above a year ago and up US$10.54, or 20.5 percent, from the August 18 low. The five-year average change in the cutout value for this week versus last is a drop of US$0.21.

 

The four-month high in wholesale pork prices this week "is particularly noteworthy for the simple fact that it's happening in November," said Kevin Bost, president of Procurement Strategies, in his latest market outlook update. "On average, pork prices are at their lowest in November and December--it's a virtual tie when measured over 25 years," he said. "The cutout chart suggests that a rally of considerable proportion is just now getting underway."

 

Some brokers and analysts said that pork demand at the wholesale level may turn slow since prices have rallied so much which led to speculation that some packers may trim their slaughter schedules next week. Reducing daily slaughter rates could cause cash hog prices to flatten or possibly turn weaker in the near-term.

 

This week's cattle slaughter was estimated at 530,000 head, compared with 631,000 a week ago and 570,000 a year ago. Year-to-date cattle slaughter is down four percent from a year ago.

 

The week's hog slaughter estimate was 2.047 million head, compared with 2.322 million a week ago and 2.046 million a year ago. For the year, hog slaughter is off 2.8 percent.

 

The USDA estimated total beef, pork and lamb production for the week at 832.2 million pounds. Last week's output was 970.8 million pounds, and the year-ago figure was 869.1 million pounds. Year-to-date combined meat output is down 2.5 percent.

 

Broiler/fryer slaughter for the week was estimated at 118.854 million head, compared with 157.644 million a week ago and 116.875 million a year ago.