CattleNetwork.com, KS
11-17-06
Hog Outlook: Who Will Cut Production To Cover Higher Costs?
Pork exports in September were up 7.4% from 12 months earlier. For JanuarySeptember pork exports were up 11.5% from a year earlier.
Pork imports for January-September were 1.5% below the same period in 2005.
Net pork exports for January through September were at 9.52% of production, up
from 8.08% a year earlier. This growth in net pork exports along with population
growth are the major reasons for the stronger live hog demand than consumer
demand for pork.
Our growth in pork exports by country were: Canada up 7.6%, Mexico up 18.6%,
Russia up 131.2%, South Korea up 47.8%, China and Hong Kong up 10.7%,
Taiwan up 3.9%, Caribbean up 89.3% and other up 7.9%.
Live hog imports from Canada were down 5.5% in September from 12 months
earlier, feeder pig imports were up 1.4%, but slaughter imports were down 16.6%
from a year earlier. Live hog imports for the first 9 months of 2006 were up 7%,
feeder pig imports were up 12.2% and slaughter hog imports were down 3.3% for
January-September compared to a year earlier.
Slaughter since September 1 is up 2.55% from the same period in 2005. Based
on the September Hogs and Pigs report we are expecting slaughter to be up
2.0%. The 2.55% is from U.S. raised hogs. As long as slaughter comes in within
about half of one percent of expectations, we have no complaints about the Hogs
and Pigs report.
The average weights of barrows and gilts in Iowa-Minnesota were up last week
by 0.5 pound from a week earlier, but were 0.9 pound below 12 months earlier.
These lighter weights than a year earlier are an indication that the higher feed
prices are resulting in pulling weights down some.
indicates with expected oil prices, A study by the Center for Agriculture and
Rural Development (CARD) at Iowa State University tax credits and distiller
dried grains when combined with plant construction and operating costs creates
a value for corn at $4.05 per bushel. This indicates that as long as corn prices
are below $4.05 per bushel, new ethanol plants will be built and they will force
the prices up to $4.05 per bushel.
What does this mean for the hog industry? This priced corn would increase the
cost of producing hogs just over 30%. We believe U.S. production of hogs would
need to be reduced 10-15% to drive up hog prices enough to cover these costs.
The big question is who will cut hog production? With the current structure of the
hog industry with high fixed investments there is likely to be substantial pain
before the reduction occurs.
With the large runs of market hogs being influenced some by feed costs, hog
prices came under strong downward price pressure this week.
Top live prices this Friday morning were $5.00 to $5.50 per cwt below 7 days
earlier. The weighted average negotiated carcass price Friday morning was
$3.94 to $5.32 per cwt below a week earlier.
The top live prices Friday morning for select markets were: Peoria $37.00 per
cwt, St. Paul $40.00 per cwt, Sioux Falls $40.50 per cwt and interior Missouri
was unavailable.
The weighted average carcass prices by geographic area Friday morning were:
western Cornbelt $56.15 per cwt, eastern Cornbelt $55.43 per cwt, IowaMinnesota $56.33 per cwt and nation $55.80 per cwt.
Slaughter this week under Federal Inspection was estimated at 2121 thousand
head, down 0.9% from a year earlier.
There will be no letter next week due to the Thanksgiving holiday. Have a happy
one.
Source: Glenn Grimes & Ron Plain, University of Missouri - Columbia