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Hog prices rallied back with fewer hogs slaughtered
Hog Outlook
Glenn Grimes & Ron Plain
University of Missouri - Columbia

Hog weights continue to run at record high levels but slaughter numbers for the past three weeks have been below a year earlier. With the smaller number slaughtered, hog prices have rallied back into the solid profit level for the average producer.

Sow slaughter continues to run below a year earlier. For the year through the week ending February 11, sow slaughter is below a year earlier by 3.6 percent. However, even though gilt slaughter ran below the five-year average in December, January’s gilt slaughter was near the five-year average and the first three weeks of February is near the five-year average for February. If we are building the breeding herd, it is at a slow rate based on gilt and sow slaughter for the last two months.

Retail pork prices for January were down 0.8 percent from December of 2005 and down 2.5 percent from January of 2005. All of the decline in retail prices plus some was passed on to the producer. Prices received by producers in January were 22 percent below the same month in 2005.

Most of the gain to marketers by the lower hog prices went to the processor-retailer segment. The packers margin in January was up only 0.8 percent while the retailers and processor margin was up 9 percent from 12 months earlier.

Good news from the north this week. Canada released their hogs and pigs report for January 1, the total number of hogs and pigs on farm were down 1.2 percent from a year earlier. The breeding herd was down 0.2 percent and the market herd was down 1.3 percent from 12 months earlier.

Due to the strength of the Canadian dollar relative to the U.S. currency, Canada’s hog producers are in a profit squeeze. Reports from north of the border are that additional reductions in the Canadian herd will occur unless the U.S. dollar gains in value relative to the Canadian dollar.

Hog prices bounced around this week but held most of the gains of last week for carcass base prices and terminals ended the week from $1 higher to $0.75 lower compared to seven days earlier.

The top live prices this Friday morning for select markets were: Peoria $40 per cwt., and interior Missouri $41 per cwt. The average weighted base price for carcasses this Friday morning were $0.90 lower to $3.08 higher compared to a week earlier. The weighted average base price by area this Friday morning were: western Corn Belt $60.57 per cwt., eastern Corn Belt $61.66 per cwt., Iowa-Minnesota $60.53 per cwt., and nation $61.06.

Additional gains in hog prices seasonally are expected as we go from winter into spring. The futures price for live hogs at the current time indicates live prices in the low 50s and carcass prices in the low 70s in June.

Slaughter this week under Federal Inspection was estimated at 1,947,000 head, down 1.2 percent from a year earlier.

Demand for hogs at the live level for November-January was down only 1.6 percent from 12 months earlier. The stressed prices in January were mostly due to supply.

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