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Labor Dispute Causes Short-term Hog Price Drop

by 5m Editor
28 June 2003, at 12:00am

US Weekly Hog Outlook, 27th June 2003 - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.

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Ron Plain
Ron Plain

This has not been a good week for hog producers. Hog prices this Friday are $3 to $5 below a week earlier. The reason is easy to identify: a labor lockout that stopped hog slaughter at some plants in Canada sent enough hogs south to wreck the market. This labor dispute has been settled, so conditions will likely get back close to normal in a week or so.

Top prices this Friday for barrows and gilts at select markets were: Peoria $40.50, St. Paul $40.00, Sioux Falls $40.00 and interior Missouri $40.75.

Average prices for 185-pound carcasses with 0.9-1.1 inch back fat, 6 square inch loins, 2 inches deep were $1.75 to $5.89 lower this Friday morning than 7 days earlier. These carcass prices by area were: western Cornbelt $59.29, eastern Cornbelt $62.88, Iowa-Minnesota $59.38 and nation $60.64.

May was not a good month for pork demand at the consumer level. A portion of the weakness was due to May having 1 less weekday slaughter day in 2003 than 2002. Even so, retail pork prices declined from April to May, which we believe will be for only one month. However, demand at the live hog price level strengthened and for January - May was down less than one percent from a year earlier. We still believe demand at the live hog level for the year will likely be positive.

Pork exports for January-April were up between 7 and 8 percent compared to 12 months earlier. Pork exports to Canada were down over 17 percent and were down nearly 20 percent to Mexico. However, increases to Japan, South Korea, Hong Kong and others were large enough to more than offset the reductions to Canada and Mexico.

Pork imports also increased by almost 20 percent with most of the increase from Canada and Denmark.

Live hog imports from Canada for January-April were up 5.6 percent from a year earlier. Feeder pig imports were up nearly 22 percent, but slaughter hog imports were down over 22 percent. The increase in feeder pig imports continues to be fueled by corn producers in the U.S. who wish to feed hogs but not be in the farrowing end of the industry.

The average of the trade estimates for the June 1 Hogs and Pigs report is for the total herd to be down a short 3 percent, the breeding herd a long 4 percent and the market herd a short 3 percent.

These average values for the Hogs and Pigs are for a little more liquidation than we believe most likely but the difference is not large enough to argue much about.

Slaughter this week under Federal Inspection was estimated at 1,786 thousand head, down 3.1 percent from a year earlier.

Feeder pig prices at United Tel-o-auction this week showed a big difference from single source to commingled sources. The single source pig prices this week were quite close to two weeks ago, but commingled pigs sold much lower. These prices by weight groups were: 40-50# $45.50-$80 per cwt, 50-60# $45.50-$79, 60-70# $43-60, 70-80# $69 and 80# plus $30-$38.50.

The Hogs and Pigs report was mixed as compared to expectations. The total herd was 97.4 percent of last year, the breeding herd was 95.7% and the market herd was 97.6 percent of 2002.

The negative surprise was 98 percent of last year for third quarter farrowing estimates and 99 percent of 2002 for the fourth quarter. This suggests substantial productivity growth. If this occurs, 2004 marketings will be down only a little for 2003.

Our preliminary estimate for slaughter for the third quarter is for slaughter to be down 4.5 percent from 2002, terminal market prices to be in the upper thirties and Iowa-Minnesota negotiated base prices in the low forties. For the fourth quarter, slaughter down 2.5% from a year earlier, prices at terminal markets in the mid thirties and Iowa-Minnesota negotiated base prices in the upper thirties.

5m Editor