Lower Price, Higher Production Forecast For 2015
The October WASDE made only minor changes to USDA’s production and price forecasts for 2014 pork, but it increased their forecast of 2015 pork production by 2.6 percent and lowered their forecast of next year’s average hog price by $4-$5/cwt. USDA is forecasting 51-52 percent lean hogs will average close to $77.60/cwt of live weight this year and between $63/cwt and $68/cwt next year.
Reduced pork production and record prices are beginning to drag on pork trade. During August U.S. pork imports were up 9.9 percent and exports were down 13.1 percent. Most of the increase in pork imports came from Poland and Denmark. The decline in pork exports was due to less pork going to China and Japan. Imports equaled 4.7 percent of August pork production while exports equaled 20 percent of U.S. production.
Imports of feeder/weaner pigs were down 8.6 percent in August. Imports of other hogs were up 1.9 percent compared to last August.
Retail pork demand in August was up 2.9 percent compared to a year ago. August was 20th consecutive month with positive growth in pork demand. Beef demand was 9.4 percent stronger than in August 2013. Retail chicken demand was down 1.5 percent and turkey demand was down 4.1 percent in August.
Export demand for U.S. pork was down 9.3 percent in August.
Hog prices were lower this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $102.58/cwt, down $1.53 from last week. The eastern corn belt averaged $102.37 this morning. There were no morning price quotes today for the western corn belt or Iowa-Minnesota. Peoria had a top live price today of $76/cwt and interior Missouri’s live top today was $75/cwt which is $1.25 lower than last Friday.
The pork cutout value also turned lower this week. This morning’s cutout was $123.48/cwt FOB the plants, down 95 cents from last Friday. Loins and butts were lower. Hams and bellies were higher. Packer margins are very good. This morning’s hog carcass price was only 83.1 percent of the cutout value.
The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 284.8 pounds, up 0.2 pound from the week before and 10.5 pounds heavier than the same week last year. This was the 21st consecutive week with weights at least 10 pounds heavier than a year ago.
This week’s hog slaughter totaled 2.136 million head, up 2.2 percent from the week before, but down 6.4 percent from the same week last year. This was the largest weekly slaughter since February. Hog slaughter has been below the year-ago level for the last 33 weeks.
The October hog contract ended the week at $109.45/cwt, up $3.85 from the previous Friday. December hogs gained $1.38 this week to close at $94.40/cwt. The February lean hog futures contract settled at $91.22/cwt, a gain of 57 cents from the previous Friday. April hogs ended at $91.50/cwt. ∆
DR. RON PLAIN AND DR. SCOTT BROWN: Agricultural Economists, University of Missouri