Higher Expected Meat Production Means Lower Prices
Last year the U.S. exported a record $5.6 billion of pork and $1.0 billion of pork variety meats. That averages out to $62.45 of exports for each U.S. hog slaughtered in 2014.
USDA’s February WASDE report made big changes to the livestock numbers, but only small changes to the crop numbers.
Compared to their January forecasts, USDA increased their estimate of 2015 pork production by 0.8 percent and increased their beef estimate by 1.6 percent. They upped their estimate of broiler production by 0.8 percent and are predicting 2.5 percent more turkey than they forecast in the January WASDE. The across-the-board increase in expected meat production means lower prices. They cut their forecasts of 2015 hog prices by $6.50/cwt, slaughter steer prices by $3/cwt, broilers by 3.5 cents per pound and turkeys by 2 cents per pound. USDA expects 2015 barrows and gilt prices to average between $54 and $58/cwt of live weight, down from $76.03/cwt in 2014.
USDA raised their estimate of corn usage for ethanol production by 75 million bushels, but lowered their feed and residual estimate by 25 million bushels. They narrowed their price range, but left the midpoint unchanged at $3.65/bu. On soybeans, they increased their crush number by 15 million bushels but left their price estimate unchanged at $9.45-$10.95 per bushel.
Friday morning’s pork cutout value was $73.16/cwt FOB the plants, down $1.21 from the week before and down $20.56 from a year ago. Belly prices were sharply lower this week. This is the fourth consecutive week with a lower cutout value.
Thursday’s negotiated carcass price averaged $56.73/cwt which is $4.18 lower than a week earlier. Because of low sales volume and confidentiality rules, there were no national or regional negotiated price reports this morning.
Peoria had a top live price today of $38/cwt, $4 lower than seven days ago. The top price Friday for interior Missouri live hogs was $41.50/cwt which is down $3.00 from the previous Friday.
Hog slaughter this week totaled 2.222 million head, down 1.2 percent from the week before, but up 6.1 percent from same week last year. Hog slaughter has been above the year ago level for five of the last six weeks. The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 285.6 pounds, down 0.8 pound from the week before, but up 4.6 pounds from a year ago. Weights have been above year ago each week since March of 2013.
The work slowdown at west coast seaports is putting added pressure on hog and pork prices. Hopefully a settlement in the labor dispute is coming soon. Current hog prices are the lowest since December 2009.
Hog futures were down this week. The February lean hog futures contract closed today at $62.07/cwt, down $1.80 for the week. April hog futures ended the week at $66.02/cwt, down $3.25 from the week before. May hogs lost $1.48 this week to close at $76.12/cwt. The June contract ended the week at $80.12/cwt. ∆
DR. RON PLAIN AND DR. SCOTT BROWN: Agricultural Economists, University of Missouri