By Ron Plain & Scott Brown, University of Missouri Ag Economists
The pork demand picture is mixed. Through August, 2012 domestic pork demand was down 1.3%, export demand was up 3.3%, and live hog demand was in between at down 0.2%. Given the weak economy, a decline in domestic demand is not a big surprise. Given the 1.5% decline in the supply of competing meats, the 1.3% decline in domestic pork demand is not encouraging either.
During September, the average retail price of pork in grocery stores was $3.507 per pound. That was 1.9 cents lower than in August and 5.4 cents lower than last September. The average price of slaughter hogs during September was $50.85/cwt, down $12.66 from August and down $14.60 compared to September 2011. The September price decline was driven in large part by increased supply. September daily pork production was 4.3% higher than in September 2011.
Last week, USDA’s Foreign Ag Service released their updated estimates of 2012 world pork production and trade. The U.S. has the third largest hog herd (after China and the E.U.); is the third largest producer of pork (after China and the E.U.); ranks seventh in pork imports (after Japan, Russia, China, Mexico, South Korea and Hong Kong); and ranks first in pork exports. USDA-FAS predicts the U.S. hog inventory, pork production, and pork imports will all decline in 2013. U.S. pork exports are expected to increase next year.
Hog prices held steady last week. The national average negotiated carcass price for direct delivered hogs on the morning report on Friday was $81.52/cwt, up 6 cents from the previous Friday and up $17.97 from five weeks ago. The eastern corn belt averaged $80.31/cwt on the morning report on Friday. The western corn belt averaged $83.55 and Iowa-Minnesota had a Friday morning average negotiated price of $83.64/cwt. Peoria had a top live price Friday morning of $55/cwt. Zumbrota, MN topped at $57/cwt. The top for interior Missouri live hogs was $58.50/cwt, unchanged from the previous Friday.
The Thursday afternoon calculated pork cutout value was $87.79/cwt, up 10 cents from the previous Thursday, but $11.61 lower than a year ago. Loins and butts were lower this week while hams and bellies were higher.
Packer margins have tightened in the last two weeks. Today’s hog prices are 92.9% of pork cutout value.
Hog slaughter last week totaled 2.388 million head, down 0.3% from the week before, but up 3.3% compared to the same week last year. The average barrow and gilt live weight in Iowa-Minnesota the previous week was 272.2 pounds, up 0.9 pound from a week earlier, but down 0.1 pound from a year ago. Four of the last five weeks, weights have been below year-ago.
Hog futures were higher last week. Friday's close for the December lean hog futures contract was $79.62/cwt, up $1.25 from the previous Friday. February hog futures ended the week $1.05 higher at $85.70. April hogs settled at $90.80/cwt, June at $100.82/cwt.