Hog Outlook
Ron Plain
University of Missouri - Columbia

Hog producers have been earning a profit this summer, so it is time to start worrying about herd expansion. History indicates that on average, hog slaughter goes above year-ago levels five quarters after hogs return to profitability.

For the current cycle, the second quarter of 2010 was the first quarter with solid profits, which implies that the third quarter of 2011 should be the first quarter with hog slaughter above the year-earlier level.

There are two ways to increase the size of the breeding herd: add gilts faster, or cull sows slower. It looks like producers are doing both.

Since the first of June, sow slaughter has been down a whopping 15.4 percent compared to a year ago. Part of this drop can be explained by the fact that we had 3 percent fewer sows on June 1 than a year ago. Part is because of fewer Canadian sows being imported for slaughter. The rest appears to be due to a desire to increase farrowings.

The gilt slaughter data collected by Glenn Grimes indicates a decline in the percent of gilts in barrow and gilt slaughter mix. This implies more gilts are being retained to add to the breeding herd.

Look for the USDA to tell us the Sept. 1 breeding herd is larger than in June, but still 1 percent or so smaller than a year ago.

The pork cutout value declined a bit further from the $96.74 per cwt. record set on Aug. 24. Thursday afternoon’s calculated pork cutout value was $92.38 per cwt., down $1.35 from the previous Thursday.

Loin and butt prices were lower last week, while hams and bellies were higher. The pork cutout is $38.69 per cwt. higher than at this time last year.

The national weighted average carcass price for negotiated hogs Friday morning was $76.08 per cwt., $3.28 lower than the previous Friday. Regional average prices on Friday morning were: eastern Corn Belt $75.73, western Corn Belt $77.39 and Iowa-Minnesota $76.77.

The top live hog price Friday was $54 per cwt. at Zumbrota, Minn., and $53 at Peoria. The interior Missouri live top Friday was $55.75 per cwt., 75 cents lower than the previous Friday.

Last week’s hog slaughter totaled 2.117 million head, up 0.3 percent from the week before, but down 6.7 percent compared to slaughter during the same week last year. Based on the market hog inventory in the June Hogs and Pigs report, slaughter this month should be down a bit over 5 percent, compared to last September.

The average carcass weight of barrows and gilts slaughtered the week ending Aug. 21 was 197 pounds, the same as the week before and the same as a year earlier. Iowa-Minnesota live weight two weeks ago averaged 265.6 pounds, down 1 pound compared to a week earlier and 1.4 pounds lighter than the same week last year.

The October lean hog futures contract ended the week at $77.20 per cwt., up $2.38 from the previous Friday. The December contract settled at $74.65 for the week. February closed the week at $77.62 per cwt.

The unemployment rate increased slightly to 9.6 percent in August. That is not good news for meat demand.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Ron Plain may write to him in care of this publication.