GDP Growth Is Positive For Meat Demand
This week’s hog slaughter totaled a record 2.532 million head, up 5.5 percent from last week, up 7.2 percent from the same week last year, and 8,000 head above the old record set just two weeks ago. This week’s total was boosted because Smithfield slaughtered some hogs on Sunday to make up for their Tar Heel plant being down part of last week due to extended weather problems from Hurricane Matthew. The Sunday-Monday slaughter total was 460,000 head.
There has been some good news for the economy lately. Third quarter GDP growth rebounded to 2.9 percent and the October unemployment rate declined to 4.9 percent. That should be positive for meat demand.
The Federal Reserve Bank did not raise interest rates at their November meeting. A rate hike is expected in December.
Iowa State University calculations put the average net return for hogs marketed in September at a negative $15.77 per head. This was the first month of red ink for the typical Iowa farrow-to-finish operation since January and the worst net return since early in 2013. Red ink is likely to last until spring. Lee Schulz estimated September cost of production at $45.82/cwt of live weight gain. Production cost is the lowest since May.
Friday morning’s pork cutout value was $73.51/cwt FOB slaughter plants. That is down 49 cents from the week before and down $2.56 from a year ago. This morning's loin prices ($67.68/cwt) are only 92.1 percent of the pork cutout value. That appears to be the lowest percentage in over 18 years.
The national negotiated barrow and gilt carcass price averaged $42.71/cwt on the morning report today, down $1.38 from a week earlier and down $10.65 from a year ago. The eastern corn belt averaged $42.54/cwt this morning, down $1.44 from last Friday. Neither the western corn belt nor Iowa-Minnesota had a morning price quote. This morning’s national negotiated hog carcass price is only 58.1 percent of the cutout value.
The top hog price today at Peoria was $25/cwt, unchanged from a week ago. Today’s top price for interior Missouri live hogs was $28.50/cwt, down 75 cents from last Friday.
The average slaughter weight of barrows and gilts in Iowa-Minnesota last week was 280.9 pounds. That is down 0.9 pound from the week before and down 1.8 pounds from the same week last year.
Year-to-date, hog slaughter is up 1.6 percent, but because of lighter weights pork production is up only 1.0 percent.
Hog futures were lower this week. The December lean hog futures contract ended the week at $46.15/cwt, down 65 cents from the preceding Friday. February hogs settled at $52.975/cwt, down $1.025 from last Friday. The April contract settled at $60.40, down $1.25 for the week. June hogs settled at $72.70 today.
Corn futures were also lower this week. The December corn futures contract lost 6.25 cents this week to close at $3.4875 per bushel. March corn futures closed 5.75 cents lower than last Friday at $3.575/bu. May corn futures ended the week at $3.65/bu. July corn settled at $3.725/bushel. ∆
DR. RON PLAIN AND DR. SCOTT BROWN: Agricultural Economists, University of Missouri