December 5, 2012

During October, the average Iowa market hog sent to slaughter cost a record US$73.29 per hundred pounds of live weight (cwt) and was sold at a loss of US$31.16 per head.

According to Iowa State University calculations estimate this was the third consecutive monthly record high for cost of production. Cost of production this year is expected to average a bit over US$68/cwt, US$3 dollars above the 2011 record. Thus far in 2012, the average hog has sold at a loss of US$8 per head. When the year is over, losses are expected to average from US$11-12 per head, making this the worst year financially since 2009.

There were 606 million pounds of pork in cold storage at the end of October. That was down 4% from the month before, but up 24% compared to a year ago. Increased stocks of frozen pork often correlate with increased pork exports.

Retail pork demand was up 3% in September, but export demand was down 11.6%. Live hog demand was down 0.8%. This was a very good week for hog and pork prices. The Thursday (Nov 29) afternoon calculated pork cut-out value was US$84.19/cwt, up US$2.27 from the previous Thursday. Loin prices were a bit lower, but hams, bellies and butts were higher for the week.

The national average negotiated carcass price for direct delivered hogs on the morning report Tuesday (Dec 4) was US$80.76/cwt, up US$8.69 from last Friday (Nov 30). The eastern Corn Belt was US$8.50 higher than last Friday at US$80.44/cwt. The western Corn Belt and Iowa-Minnesota prices both increased by more than US$6.75 to US$81.84/cwt Tuesday (Dec 4) morning.

Hog slaughter this week totalled 2.399 million head, up 16.1% from the week before (which was low because of the Thanksgiving holiday) and up 1.5% compared to the same week last year. Year-to-date hog slaughter is 1.9% above 2011. USDA's September hog inventory survey implies December and January barrow and gilt slaughter will be down 1% from 12 months earlier.

The average barrow and gilt live weight in Iowa-Minnesota last week was 274.4 pounds, 0.5 pounds above a week earlier, but down 1.6 pounds from a year ago. This was ninth consecutive week with weights under the year-ago level.

Friday's (Nov 30) close for the December lean hog futures contract was US$84.07/cwt, up US$1.60 from the previous Friday. February hog futures ended the week US$0.45 lower at US$86.92/cwt. April hogs settled at US$91.77/cwt; June at US$101.52/cwt.