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Continued price improvement likely

by 5m Editor
18 January 2003, at 12:00am

US Weekly Hog Outlook, 17rd January - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.

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It looks like the markets will finish out the week $4-$5 higher on a live weight basis at most of the terminals near $34 per hundredweight, and $3-$4 higher on a carcass basis at $44.50. The futures market now appears to have lost just a little of its optimism about summer hog prices. The May, June and July contracts ended the week at $61.80, $63.12 and $60.92, respectively, around $2 below the previous week. Although each remains close to $20/cwt higher than today's carcass price for hogs, the numbers get closer in line to the usual seasonal trend.

As indicated last week, the predicted run-up this year remains one of the largest. Since 1989, hog prices have increased an average of 18% from January to June. The biggest increase was 43% in 2001. Last year, barrow and gilt prices declined by 6% from January to June. The prospects for a dramatic increase in the February price to narrow that spread appear limited, and a reduction in farrowing and the breeding herd numbers that would drive up the price this summer would have to be occurring now. Feeder pig prices are down only slightly this week and demand is called light to moderate. Feeder pig prices trended lower this week with early weaned pigs steady to $2 lower, and 40-50 pound pigs steady to $1 lower.

Sioux Falls practical top was the high at the terminal markets Friday at $35.00/cwt with St. Paul just below at $34.50. Peoria was at $34/cwt. The National weighted average carcass price Friday morning for negotiated hogs with 0.9-1.1" backfat, 6 sq. in. loins 2" deep was $45.22/cwt, $4.33 higher than last Friday. Regional prices on Friday morning were: eastern corn belt $45.44, western corn belt $44.98, and Iowa-Minnesota $44.90/cwt., all about $4.00 better for the week.

The total federally inspected hog slaughter for this week is 1.988 million head, up 1.7% from the same week last year. The average market weight continued to climb to 266.1 pounds this week, up .8 from last week and 1.9 pounds from last year. The absence of extreme cold spells has contributed to good weight gains when producers normally expect hogs to slow down. Packers are looking at a Saturday kill of 65,000, way above last week's 19,000, but well below last year's 79,000. Some of Saturday's numbers are to make up for some plants' holiday next Monday.

Although not a dramatic increase in product prices, at mid-day on Friday, 1/4 inch trim loins weighing less than 21 pounds were trading at 92 cents per pound, up 2 for the week. The wholesale price of Boston butts was the big gain this week by 7.5 cents to 57.5 cents per pound. Ham prices were up 2.5 cents at 47 cents per pound for 17- 20# hams. Pork bellies picked up 2 cents from last Friday with 12-14 pound bellies ending the week at 79 cents per pound.

It looks like we may see some continued improvement in the future, as pork continues to be a relative bargain to beef in the grocery store. Packers are hoping for good movement of pork product in the next few weeks and if packer margins improve, we should see the price of hogs increase.

5m Editor