Strong Meat Demand Drives Hog Prices
Most of the hog market’s attention this year has been on the reduced hog slaughter caused by the PED virus. But, strong meat demand also is driving this year's record hog and pork prices. Domestic meat demand was up 4.1 percent in April compared to a year earlier. On average, domestic demand for red meat and poultry has been up 2.7 percent over the last 12 months. April domestic demand for pork was up 6.7 percent compared to April 2013. On average pork demand over the last 12 months was up 5.0 percent. Export demand for U.S. pork was up a whopping 37.6 percent in April compared to a year ago. The average for the last 12 months is up 11.2 percent.
This week the August, October and December lean hog futures contracts each set new all-time record highs for their respective months. The June lean hog futures contract expired today at $115.90/cwt, up $1.33 for the week. July hog futures ended the week at $127.00/cwt, up $2.03 from the week before. August hogs gained $1.97 this week to close at $131.27/cwt. The October contract ended the week at $111.75/cwt; December at $98.42/cwt.
USDA’s June WASDE had few surprises. They made no changes in their estimates for this year’s corn crop. Their only change for soybeans was a 5 million bushel reduction in stocks. For livestock, USDA raised their estimate of 2014 pork production by 0.7 percent. They now predict this year’s pork production will be 1.6 percent less than last year and 2.1 percent lower than next year. Total red meat and poultry production in 2014 is expected to be down 1.5 percent from 2013 and 1.7 percent below next year’s total.
Cash hog prices were higher this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $113.49/cwt. The eastern corn belt averaged $112.97/cwt. The western corn belt had a morning average of $115.06/cwt as did Iowa-Minnesota. Peoria had a top live price today of $76/cwt. The top price Friday for interior Missouri live hogs was $82.25/cwt which was $4.50 higher than the previous Friday. Friday morning's pork cutout value was $120.88/cwt FOB the plants, up $1.29 from the week before and up $18.18 from a year ago. This morning's hog carcass price averaged 93.9 percent of the cutout value.
Hog slaughter this week totaled 1.915 million head, down 0.8 percent from the previous week and down 1.8 percent compared to last year. The average live slaughter weight of barrows and gilts in Iowa-Minnesota last week was 286.7 pounds. That was unchanged from the week before and 11.7 pounds heavier than a year ago. It was the 62nd consecutive week with Iowa-Minnesota live hog weights above the year-earlier level.
This week’s USDA Crop Progress report said that 75 percent of U.S. corn acres were in good or excellent condition on June 8. That is down 1 point from the week before, but 12 points higher than on the same date last year. The July corn futures contract lost 12 cents this week to close at $4.47. The September contract ended the week at $4.43, down 13 cents from the previous Friday. December corn futures ended the week at $4.475/bu. ∆
DR. RON PLAIN AND DR. SCOTT BROWN: Agricultural Economists, University of Missouri