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Hog Outlook: Diversity in Smaller Hog Producers

by 5m Editor
11 August 2007, at 7:39am

US Weekly Hog Outlook, 11th August 2007 - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

Smaller hog producers are still quite diversified. Based on the hog structure study just completed by the University of Missouri and Iowa State University, 91 percent of the producers producing less than 50,000 hogs annually also produced corn.

Hog Producers Producing Other Commodities, 2006
Commodity Firm size
(thousand-head marketed annually)
Average 1-50
Size Groups
1 - 3 3 - 5 5 - 10 10 - 50
Corn 89 93% 94% 92% 91%
Soybeans 84 88 87 83 85
Wheat 29 28 28 33 30
Dairy/milk 6 0 4 7 5
Beef cow/calf 25 16 17 14 20
Beef stockers 8 5 2 3 6
Beef fed cattle 23 25 20 17 22

With 91 percent of these producers producing corn, their competitive position has increased with larger producers with the increase in feed costs because of ethanol demand for corn. However, there may be a possibility that several of these corn and hog producers may be reaching an age in life that with $3-per-bushel-plus corn prices they will decide that with these higher corn prices, they can reach their income needs without producing hogs. If so, these produces may bail out of hog production fairy quickly when we run into low hog prices relative to the cost of producing hogs.

USDA's August estimate for the 2007 corn crop is for 13.034 billion bushels, up 23.9 percent from 2006. The forecast for corn prices for the 2007-08 marketing year is $3.10 per bushel, up $0.10 per bushel from the 2006-07 marketing year.

Pork cutout prices moved $0.63 per cwt lower this week with the Thursday afternoon cutout at $70.61 per cwt. Loins were down $1.31 per cwt at $87 per cwt compared to a week earlier, hams were up $1.06 per cwt at $61.47 per cwt, and bellies at $183.83 per cwt were down $1.87 per cwt from seven days earlier.

The average weight of barrows and gilts in Iowa-Minnesota was up 0.6 pound from a week earlier and up 2.5 pounds from a year earlier. With the heat through much of the Midwest, weights for this week are likely to be down from last week but will need to decline 2.4 pounds from this week to be at last year's level for the same week. For the four weeks ending last week, live weights of barrows and gilts in Iowa-Minnesota have been up an average of almost 1.5 pounds per head from a year earlier.

As a part of the annual meeting of the American Agricultural Economics Association, participants estimated commodity prices for the remainder of 2007 and 2008. The estimates for live barrows and gilts 51-52% lean are: the third quarter of 2007 is $50.50 per cwt, the fourth quarter of 2007 is $46.21 per cwt, and the estimate is $48.86 per cwt for 2008. The big question is will we be able to keep live hog demand growth sufficient to get the estimated prices. The odds appear high for some growth in production through 2008.

There continues to be several rumors about China's purchase of pork with a report in late week by Reuters that China had cut deals to import 70,000 tons of pork, mostly from the United States for reserves ahead of the National Day holiday in October. It is reported that this is in carcass weight equivalents but would amount to close to 154 million pounds. If it is in carcass weight equivalents, it would amount to 63 percent of the May total U.S. pork exports. If this turns out to be true, it will help hog prices in coming weeks, and the odds now appear pretty good for this to be real.

The prices for live hogs Friday morning were mixed from $1 per cwt lower to $3.50 per cwt higher compared to a week earlier. The weighted average negotiated carcass prices Friday morning were $1.22 per cwt lower to $4.74 per cwt higher compared to seven days earlier.

The top live prices Friday morning for select markets were: Peoria $50.50 per cwt, St. Paul $48 per cwt and interior Missouri $52 per cwt. The weighted average negotiated prices Friday morning by area were: western Cornbelt $69.16 per cwt, eastern Cornbelt $71.77 per cwt, Iowa-Minnesota $68.74 per cwt and nation $70.82 per cwt.

Slaughter this week under Federal Inspection was estimated at 2,013 thousand head, up 6.6 percent from a year earlier.

5m Editor