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Weekly Review: Improvement in Packers' Margin

by 5m Editor
21 March 2009, at 10:04am

US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

Pork exports in January 2009 were down 8.7 per cent from a year earlier. Pork imports were also down but by only 1.7 per cent. Net pork exports as a percent of production declined from 13 per cent in January 2008 to 12 per cent in January 2009.

Our pork exports in January this year to Japan were up 20.9 per cent, to Mexico up 62.8 per cent, to Canada down 9.3 per cent, to South Korea down 19.9 per cent, to Russia down 75 per cent, to mainland China down 90.1 per cent, to Hong Kong down 17.8 per cent, to Australia up 70 per cent, to Taiwan up 74 per cent and to other countries down 7.5 per cent from 2008.

Live hog imports from Canada during January were down 41.6 per cent from a year earlier. One of the reasons for the decline in live hog imports is due to their reduction in the hog herd. Another possible reason for the decline is the country of origin labeling or COOL.

Slaughter weights for barrows and gilts in Iowa-Minnesota last week at a live weight of 268.7 pounds per head were up 0.2 pound from a week earlier and up for the third consecutive week. This was also up 1.1 pounds from a year earlier.

Retail pork prices in February were down 1.2 per cent from January but up 4.8 per cent from February 2008. For January and February, retail pork prices were up 4.9 per cent. Everyone in the pork industry but the packer benefitted from these higher retail prices. The processor-retail margin was up 7.4 per cent for January and February from a year earlier. Live hog prices were up 5.5 per cent for these two months compared to the same months in 2008. However, the packers' margin for January and February was down 8.6 per cent from 12 months earlier and the packers' margin deteriorated further in March.

The packers' margin improved some this week from early March but still not good.

The cutout price per cwt of carcass Thursday afternoon at $60.80 per cwt was up $2.10 per cwt from a week earlier. Loins at $74.34 per cwt were down $0.02 per cwt, Boston butts at $61.93 per cwt were down $2.19 per cwt, hams at $49.01 per cwt were up $4.57 per cwt and bellies at $81.78 per cwt were up $5.13 per cwt from seven days earlier. Live hog prices Friday morning were $3.50 - $6.00 per cwt lower compared to Friday a week earlier. Weighted average negotiated carcass prices were $0.87 - $3.22 per cwt lower compared to seven days earlier.

The top live prices Friday morning for select markets were: Peoria $33.50 per cwt, Zumbrota, Minnesota, $34.00 per cwt and interior Missouri $39.50 per cwt. The weighted average negotiated carcass prices by area were: western Cornbelt $55.17 per cwt, eastern Cornbelt $52.72 per cwt, Iowa-Minnesota $55.25 per cwt and nation $53.55 per cwt.

The weighted average weaned pig price last week per head for 50-54 per cent lean 10 pound basis was $37.31 per head. The weighted average 50-54 per cent lean 40 pound basis feeder pig price last week was $62.33 per head. The top price per head for the 40 pound pigs in lots of 750-head-or-more was $65.50 per head.

If we tighten hog supplies in coming months as much from last year as indicated by the December Hogs and Pigs, we are likely to get a larger seasonal rally in price this year than normal. The average live price for barrows and gilts national basis in June was 23 per cent higher on average than March for the last five years.

Slaughter this week under Federal Inspection was estimated at 2155 thousand head, down 6.4 per cent from a year earlier.