Low Inventory Will Spur High Hog Prices
USDA released the results of their June hog inventory survey this afternoon. They said the market hog inventory was down 5.1 percent and the breeding herd down 0.6 percent compared to a year earlier. These were lower than expected. The pre-release trade forecasts were for the market hog inventory to be down 3.4 percent and the breeding herd to be up 1.6 percent compare to June 1, 2013. Look for continued high hog prices.
There were 575 million pounds of pork in cold storage at the end of May. That was 2 percent less than the month before and 12.7 percent less than a year ago. The big exception was pork bellies, which were up 57 percent compared to May 31, 2013.
The summer rally in hog and pork prices continues. Wednesday's cutout value, $133.67/cwt, was the second highest ever. Friday morning’s pork cutout value was $131.89/cwt FOB the plants, up $5.23 from the week before and up $20.61 from a year ago.
Cash hog prices also were higher this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $124.66/cwt which is up $7.55 from the previous Friday, up $27.37 from a year ago, and the highest price since early April. The western corn belt and Iowa-Minnesota both averaged $125.28/cwt this morning. There was no morning price report for the eastern corn belt. Peoria had a top live price today of $85/cwt. The top price Friday for interior Missouri live hogs was $89/cwt which was $6 higher than the previous Friday. This morning’s hog carcass price averaged 94.5 percent of the cutout value.
Hog slaughter this week totaled 1.91 million head, up 0.6 percent from the previous week, but down 5.4 percent compared to last year.
The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 285.0 pounds. That was down 2.0 pounds from the week before, but 11.0 pounds heavier than a year ago. It was the 64th consecutive week with Iowa-Minnesota live hog weights above the year-earlier level.
Hog futures were mostly higher this week. The July hog futures contract ended the week at $130.90/cwt, up $3.08 from the previous Friday. August hogs gained 67 cents this week to close at $129.82/cwt. The October contract ended the week at $110.90/cwt up $1.18 for the week. The December contract settled at $95.60/cwt.
This week’s USDA Crop Progress report said that 74 percent of U.S. corn acres were in good or excellent condition on June 22. That is down 2 points from the week before, but 9 points higher than on the same date last year.
The July corn futures contract lost 10 cents this week to close at $4.43. The September contract ended the week at $4.42, down 6 cents from the previous Friday. December corn futures ended the week at $4.47/bu. ∆
DR. RON PLAIN AND DR. SCOTT BROWN: Agricultural Economists, University of Missouri