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Ron Plain

It was been a tough week for the nearby hog futures contracts. The February, April, May and June contracts each ended the week roughly $2 lower than they started. These four contracts ended the week at $48.45, $53.77, $58.20 and $61.45, respectively. Much of the problem is that hog slaughter stubbornly continues to stay above that predicted by USDA's December hogs and pigs report. Since December 1, hog slaughter has been 1.1% above year ago-levels and 2.2% above that implied by the market hog inventory in the December survey.

Last Friday's release of USDA's monthly survey said the December pig crop was only 0.6% smaller than December 2001. This implies that June 2003 hog slaughter will be close to year-earlier levels (assuming continued strong imports of Canadian hogs and pigs). This is not at all what the trade has been expecting. Last June, spot market hogs averaged only $49.50/cwt on a carcass basis or $36.60 on a live basis.

Based on sow and gilt slaughter in 2002, there is reason to expect hog slaughter to be close to year-ago levels through the first half of 2003. Sow and gilt slaughter started 2002 slow and didn't go above year-earlier levels until May. Our analysis has shown a consistent decline in the size of the breeding herd since then.

This week saw live hog prices at the terminals take a big drop ($2-3/cwt) while carcass prices dipped a little in the west and moved higher in the east. St Paul and Sioux Falls topped out at $31.50/cwt on Friday. Peoria reported a practical top Friday of $32.50/cwt as did the interior Missouri market.

The National weighted average carcass price Friday morning for negotiated hogs with 0.9-1.1" backfat, 6 sq. in. loins 2" deep was $46.56/cwt, $0.73 higher than last Friday. Regional prices on Friday morning were: eastern corn belt $47.57, western corn belt $45.86, and Iowa-Minnesota $45.82/cwt. Friday morning's carcass price in the western corn belt was 37 cents lower than 7 days earlier while the eastern corn belt was $2.34/cwt higher.

Pork product values were mixed for the week. At mid-day on Friday, 1/4-inch trim loins weighing less than 21 pounds were trading at 94 cents per pound, down 2.43? for the week. The wholesale price of Boston butts gained nearly 2 cents to 58 cents per pound. Ham prices were a penny lower at 47 cents per pound for 17-20# hams. Pork bellies were unchanged from last Friday with 12-14 pound bellies ending the week at 78 cents per pound.

Federally inspected hog slaughter for this week is 1.888 million head, up 2.6% from the same week last year. January carcass weights appear to have been unchanged from last year. Given the unusually low temperatures thus far in 2003, slaughter weights should remain light through the end of winter.