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| Best strategy is to keep selling bottom 5 percent |
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The floods and excess rain have pushed corn prices above $8 per bushel in the futures market. Cash corn prices are at or above $7 for many areas. The cost of producing hogs has increased over $25 per cwt. in the last two years, just due to feed cost.
If one is planning to exit the hog industry in the near future, now is probably a good time. The current market for hog facilities even in good condition, however, is not good. A good management strategy that continues to be viable is to sell the low-producing 5 percent of the breeding herd.
Our data indicates the U.S. breeding herd on June 1 was down about two percent from a year earlier. The herd actually may be down some more than the actual because the last year provides strong evidence that the breeding herd on June 1, 2007, was larger than the current USDA data shows.
The bad news is that the market herd on June 1 was still probably 6-7 percent larger than a year earlier. All weight categories of market hogs are expected to be larger than last year when the Hogs and Pigs report is released on June 27.
Retail pork prices in May were up 1.6 percent from April and up 1 percent from a year earlier. For the first five months of 2008, retail pork prices were up 1.2 percent from 12 months earlier.
The total marketing margin for January-May was up 5.8 percent with the processor-retailer margin up 5.6 percent and the packer margin up 6.3 percent. The bad news is that the live hog price was 8 percent below last year for these five months.
Only an 8 percent reduction is not too bad, when pork production was up over 11 percent for January-May of 2008, compared to 2007. There is strong evidence of good demand growth at the live hog level.
With retail pork prices up and pork supply per capita up, it all adds up to growth in demand at the consumer level.
The big increase in retail pork prices is still in the future. However, retail pork prices showed only increases in percentage about one-third as much as the price of hogs, due to the increased pork production costs.
Feeder pig prices this week were $5-$10 per cwt. below two weeks ago at United Tel-O-Auction. Prices by weight groups at United this week were: 40-50 pounds $45 per cwt., 50-60 pounds $38-$60 per cwt.
Pork product prices recovered some this week with the cutout Thursday afternoon at $79.33 per cwt., up $4.49 per cwt from a week earlier. Loins at $97.33 were up $2.50 per cwt., Boston butts at $94.52 per cwt. were up $3.91, hams at $74.97 per cwt. were up $9.28 and bellies at $75.40 per cwt. were up $3.85 from seven days earlier.
With the stronger pork product market, this week’s live hog prices were $1.50-$3 higher per cwt. compared to last week. Weighted average negotiated carcass prices were up $2.68-$5.62 per cwt., compared to a week earlier.
The live prices for select markets Friday morning were: Peoria $47 per cwt., Zumbrota, Minn., $51 per cwt. and interior Missouri $51.25 per cwt. The weighted average carcass negotiated prices Friday morning by area were: western Cornbelt $74.10 per cwt., eastern Cornbelt $70.64 per cwt., Iowa-Minnesota $74.16 per cwt. and national $72.90 per cwt.
Slaughter this week under federal inspection was estimated at 2.081 million head, up 7.5 percent from a year earlier.
The average weight of barrows and gilts in Iowa-Minnesota for the week ending June 14 at 264.9 pounds were up 0.5 pound from the previous week and up 0.5 pound from a year earlier. This is the first week for weights in Iowa-Minnesota to be above a year earlier since early February. |
| 6/25/2008 |
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