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Hog slaughter continues to run substantially above expectations

by 5m Editor
16 August 2003, at 12:00am

US Weekly Hog Outlook, 15th August 2003 - Weekly review of the US hog industry, written by Glen Grimes and Ron Plain.

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Ron Plain
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Live slaughter hog imports for June from Canada were up almost 21 percent from 2002. For January - May, live slaughter hog imports from Canada were down nearly 22 percent. However, pork imports from Canada during June were up nearly 21 percent. For January - May pork imports from Canada were up 17 percent.

Even though Canadian imports of pork were up in June compared to January - May, they were not up as much as slaughter hog imports.

For June and July, slaughter hog imports from Canada were up enough from last year to add 1.1 percent to our total slaughter.

The partial removal of the ban on beef imports from Canada, expected in the next few weeks, will likely be more negative to beef prices than it will be positive in quickly reducing the live slaughter hog imports from Canada. However, higher beef prices in Canada should be positive for pork consumption in Canada.

Hog slaughter continues to run substantially above expectations based on the June hogs and pigs report. Slaughter this week under Federal inspection was estimated at 1,968 thousand head - up 4.0 percent from the same week in 2002.

Some of the increase in slaughter especially this week is believed to be due to hogs forward priced under the futures market. These hogs were priced using the August contract and were required to be marketed by the packer by August 15. When we get the average weights for barrows and gilts for Iowa and southern Minnesota we will have a better idea of how many hogs were pulled forward to the market in order to comply with the contract delivery time.

In recent days, hogs priced using futures-market-type contracts have been about double the normal number priced with this method. The normal number of hogs priced using the futures market as a base is between 5 and 6 percent of our slaughter, fortunately for the producers who decided those strong August futures prices this spring were too good to pass on. For the first 3 days of this week, net carcass prices for hogs priced under a futures-type contract were $3.37 per cwt higher than the net prices received for negotiated hogs.

Two or three weeks ago we believed the odds were high for slaughter this week to fall 2-3 percent below a year earlier. Hopefully the reason that slaughter turned out to be larger this week than last year was due to marketings being pulled forward to get prices under the August contract.

We still believe slaughter will drop below a year earlier for the next several weeks.

Cash hog prices held up very well this week with the near record or record high weekly slaughter for this date in August.

Even though most observers are complaining about the current low hog prices they are about 1/3 higher now than they were for this date in 2002.

Top cash prices this Friday were steady to $2.50 per cwt lower compared to a week earlier. These prices for Friday morning for select markets were: Peoria $38.50, St. Paul $38.00, Sioux Falls $41.00 and interior Missouri $39.25.

Averaged weighted prices for 185 pound carcass with 0.9-1.1 inch back fat for 6 sq. inch loin 2 inches deep were: western Cornbelt $57.73, eastern Cornbelt $56.52, Iowa-Minnesota $56.59 and Nation $56.65.

5m Editor