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Domestic demand for pork declines in weak economy
 
The pork demand picture is mixed. Through August, 2012 domestic pork demand was down 1.3 percent, export demand was up 3.3 percent, and live hog demand was in between at down 0.2 percent. 
Given the weak economy, a decline in domestic demand is not a big surprise. Given the 1.5 percent decline in the supply of competing meats, the 1.3 percent decline in domestic pork demand is not encouraging either.

During September, the average retail price of pork in grocery stores was $3.507 per pound. That was 1.9 cents lower than in August and 5.4 cents lower than last September. The average price of slaughter hogs during September was $50.85 per cwt., down $12.66 from August and down $14.60 compared to September 2011. The September price decline was driven in large part by increased supply. September daily pork production was 4.3 percent higher than in September 2011.

This week, USDA’s Foreign Ag Service released their updated estimates of 2012 world pork production and trade. The U.S. has the third largest hog herd (after China and the E.U.); is the third largest producer of pork (after China and the E.U.); ranks seventh in pork imports (after Japan, Russia, China, Mexico, South Korea and Hong Kong); and ranks first in pork exports. USDA-FAS predicts the U.S. hog inventory, pork production, and pork imports will all decline in 2013. U.S. pork exports are expected to increase next year.

Hog prices held steady this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $81.52 per cwt., up 6 cents from last Friday and up $17.97 from five weeks ago. The Eastern Corn Belt averaged $80.31 per cwt. on the morning report today.
 
The Western Corn Belt averaged $83.55 and Iowa-Minnesota had a morning average negotiated price of $83.64 per cwt. Peoria, Ill., had a top live price this morning of $55 per cwt. Zumbrota, Minn., topped at $57 per cwt. The top for interior Missouri live hogs was $58.50 per cwt., unchanged from the previous Friday.

The Thursday afternoon calculated pork cutout value was $87.79 per cwt., up 10 cents from the previous Thursday, but $11.61 lower than a year ago. Loins and butts were lower this week while hams and bellies were higher.

Packer margins have tightened in the last two weeks. Today’s hog prices are 92.9 percent of pork cutout value.

Hog slaughter this week totaled 2.388 million head, down 0.3 percent from the week before, but up 3.3 percent compared to the same week last year. The average barrow and gilt live weight in Iowa-Minnesota last week was 272.2 pounds, up 0.9 pound from a week earlier, but down 0.1 pound from a year ago. Four of the last five weeks, weights have been below year-ago.

Hog futures were higher this week. Friday’s close for the December lean hog futures contract was $79.62 per cwt., up $1.25 from the previous Friday. February hog futures ended the week $1.05 higher at $85.70. April hogs settled at $90.80 per cwt, June at $100.82 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 Ron Plain may write to him in care of this publication.
10/26/2012