By RON PLAIN
Hog Outlook
Hog producers received a welcome surprise with the mid-week release of this month’s USDA Crop Production report. It projected corn yields near 169 bushels/acre for this year’s crop, about 4 bushels above market expectations. This sent corn futures sharply lower on Wednesday, Aug. 12, and led to a reduction in the USDA projected corn price of 10 cents per bushel for the 2015/16 marketing year. The mid-point of that projection is now $3.65/bushel. If that projection is realized, it would lead to the lowest season-average corn price since 2009 and second-lowest since 2006.
The July estimate of farrow-finish profitability posted by Iowa State University last week noted a third consecutive month of profits above $20/animal. This follows much weaker readings for the first four months of the year. With input costs currently expected to remain manageable for the remainder of the year, the extent to which consumer demand for pork can continue to absorb much larger supplies will determine hog prices and profits for the remainder of 2015.
Little change was made to pork market projections for this year and 2016 in the monthly WASDE report released last week. The amount of red meat and poultry available on the domestic market this year is expected to be 8.6 pounds per person (4.3 percent) higher than last year, with a further 2 pound increase expected in 2016. With consumers needing to absorb this amount of quantity increase, developments in the U.S. and global economy continue to be important, and last week’s devaluation of China’s currency may be an indicator that more risk needs to be factored into next year’s demand strength and price projections.
Cash hog prices advanced for the week. Thursday’s average negotiated carcass price for plant-delivered hogs was $75.71 per cwt., up $1.48 from the previous week. The national average negotiated carcass price for direct delivered hogs on the morning report Aug. 14 was $74.84 per cwt., $1.53 higher than a week earlier, but still $27.92 lower than a year ago. The Western Corn Belt price gained $8.51 per cwt. to $77.12 per cwt. Iowa-Minnesota hogs sold at $77.19 per cwt. on Friday (Aug. 14), and there was no quote for the Eastern Corn Belt. Peoria had a top price of $48 per cwt., while interior Missouri live hogs had a top of $52.75 per cwt.
The pork cutout value lost 53 cents last week, with the morning cutout on Aug. 14 at $89.88 per cwt. FOB the plants. Bellies had another positive week (up 3.1 percent) while hams gained 3.3 percent. Other parts of the carcass were lower. The morning national negotiated hog price Friday equaled 83.3 percent of the cutout value, an increase of 2.2 percent versus last week’s low level.
Hog slaughter for last week was 2.218 million head, up 10.0 percent from the same week last year. Year to date slaughter is 7.7 percent above 2014. The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 276.2 pounds, unchanged from the week before and 7.6 pounds below a year ago.
The October lean hog contract ended last week at $65.57 per cwt., up $1.45 per cwt. from the previous Friday. December closed at $62.05, and February hogs finished at $66.62 per cwt.
September corn closed Friday, Aug. 14, at $3.64 per bushel, down 8.5 cents from the previous Friday. December closed at $3.76.
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.
