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Hog Outlook: Prices not expected to rally until slaughter is reduced
Hog Outlook
By Glenn Grimes & Ron Plain
University of Missouri - Columbia

The prices of live hogs rallied some early in the week, but ran into problems in late week.

The top live prices this Friday morning were from $1 to $3 lower than a week earlier. These top prices for select markets were: Peoria $35.50 per cwt., St. Paul $37 per cwt., Sioux Falls did not report, and interior Missouri $37.25 per cwt.

The weighted average base carcass price Friday morning was $1.49 to $3.54 lower from seven days earlier. The weighted base carcass price by areas of the U.S. were: western Corn Belt $52.21 per cwt., eastern Corn Belt $52.89 per cwt., Iowa-Minnesota $52.17 per cwt., and nation $52.50 per cwt.

Hog prices are not expected to rally very much until slaughter is reduced. Even with the slaughter last week over 2.1 million under Federal Inspection, slaughter barrow and gilt weights increased for the week ending January 21 from the week ending January 14. This is the first time in at least the last nine years for hog weights to increase from the second to the third week of the year.

The average live weight of barrows and gilts for the last week was 272.5 pounds - up 0.3 pounds from a week earlier. The three heaviest weights of record for barrow and gilts in Iowa-Minnesota have occurred in the last three weeks. This data suggests the possibility that we may have backed up marketings some so far in 2006.

Slaughter levels since the first of December have run larger than we expected based on the December 1 Hogs and Pigs report. Therefore, if we have backed up marketings some, the December report probably substantially understated market inventories.

Based on preliminary data, pork demand at the consumer level in 2005 was down 4.2 percent from a year earlier. The good news is that demand for pork in the fourth quarter of 2005 was down only 2.7 percent from the same period in 2004.

Also good news is the demand for live hogs during 2005 was down only 0.8 percent from a year earlier. However, demand for live hogs in the fourth quarter of 2005 was down 3.3 percent from 12 months earlier. The record high pork exports in 2005 is one of the main reasons why live hog demand performed better in 2005 than consumer demand for pork.

Live hog demand in the fourth quarter of 2005 lost 22 percent of the demand growth in live hog demand in the fourth quarter of 2003 and 2004. We continue to be hopeful that we can hold at least half of the live hog demand growth of late 2003 and 2004 through 2006.

However, live hog prices in January have us concerned that we may lose more than 50 percent of the gain of late 2003 and 2004.

Slaughter this week under Federal Inspection was estimated at 2,033,000 head, up 1.7 percent from a year earlier.

This farm news was published in the February 1, 2006 issue of Farm World.