It was not a good week for hog producers as pork cutout and hog prices reversed their upward trend and dropped this week. Loins, hams, bellies, and Boston butts were all lower this week. The pork cutout ended 2009 at $67.39 per cwt. By Jan. 20, it had reached $78.63 per cwt., the highest pork cutout since Sept. 2, 2008. USDA’s Thursday afternoon calculated cutout value was $69.24 per cwt., down $8.11 from the previous Thursday. At this time last year, the pork cutout was only $57 per cwt. The 21 percent year-over-year improvement in cutout value is not uniform across pork cuts. Wholesale prices of ribs are up 15 percent and loins are up 9 percent compared to Jan. 29, 2009. Wholesale ham prices are up 58 percent. As is often the case during a recession, lower cost cuts of meat do better than higher cost cuts.

Hog bids on a carcass basis were sharply lower this week. The national weighted average carcass price for negotiated hogs Friday morning was $62.23 per cwt., $5.18 lower than the previous Friday, but $5.77 per cwt. higher than a year ago. Regional average prices on Friday morning were: eastern Corn Belt $62.28, western Corn Belt $61.57, and Iowa-Minnesota $61.77 per cwt.

The top hog price Friday at Sioux Falls was $45.50 per cwt. Zumbrota, Minn., had a top of $42 and Peoria topped at $41 per cwt. The interior Missouri top Friday was $46 per cwt., the same as the previous Friday.

Perhaps the best news of the week was the government’s Friday announcement that the nation’s GDP grew by 5.7 percent during the final quarter of 2009. Much of the growth was due to stopping the decline in inventories. Economic growth, if it continues, will eventually lead to lower unemployment levels and that should give us stronger meat demand. This year’s hog slaughter is expected to be 4-5 percent lower than in 2008. Hog carcass prices averaged $63 per cwt. in 2008. If we get stronger meat demand, we could easily beat that this year. Pork supplies are declining, but better demand is needed to push hog prices back above breakeven.

This week’s hog slaughter is estimated to be 2.142 million head, down 4.8 percent compared to the same week last year. Since Dec. 1, slaughter of U.S. raised barrows and gilts has been roughly 2.4 percent below the level implied by USDA’s December inventory survey.

Part of this decline is undoubtedly due to bad weather.
The average carcass weight of barrows and gilts slaughtered the week ending Jan. 16 was 201 pounds, 1 pound lighter than the same week last year. Iowa-Minnesota live weights last week averaged 269.9 pounds, up 0.9 pounds compared to a year earlier.
The February lean hog futures contract ended the week at $66.50 per cwt., down $3.35 from last Friday. Today the April contract settled at $68.60, off $3.37 for the week. May closed the week at $73.65 per cwt. and June ended at $76.72 per cwt.

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 Glenn Grimes or Ron Plain may write to them in care of this publication.