Grimes and Plain Weekly Hog Outlook

CHICAGO - Aug 3/07 - SNS -- Following is a week ending hog market comment from the University of Missouri - Columbia's Glenn Grimes and Ron Plain.

Smaller hog producers are networking with one another to get economies of scale. However, there are some networking activities of producers producing over 500 thousand head of hogs annually.

The highest percent of producers networking are those marketing between 50 and 500 thousand head annually.

      Networking Activities of Hog Producers, 2006
     (percent of firms responding in size category)

                                    Firm size
                           (thousand-head marketed annually)
                                   1 - 50 50 - 500 500+
Input purchasing                    25%     62%     15%
Feed milling                        14      48       5
Hog marketing                       32      49      --
Information sharing                 22      60      --
Genetic access                      12      60      10
Feeder or weaned pigs               26      --      --
Packing / processing                --       4      24

Remember, this is percent of firms; therefore, percent of production may be substantially different.

One possible message here is that producers need to be a half-million-or-larger for networking not to be as important as for smaller producers.

We have this information on networking activities of hog producers producing between 1 and 50 thousand head annually for the last four studies of the industry. Input purchasing has increased from 7-8 percent to 25 percent; feed milling has increased from 4-5 percent to 14 percent; hog marketing has increased from 14-15 percent to 32 percent; information sharing has increased from 7-9 percent to 22 percent; genetic access has increased from 4-6 percent to 12 percent; and accessing feeder or weaned pigs has increased from 7-10 percent to 26 percent.

It is quite obvious that networking by producers is now important for hog producers and is expected to continue to be that way in the future.

The futures market continues to have counter-seasonal price activity. The reason for the strong October and December contracts prices is the rumor that because of disease problems in China, they will be in the market for substantial quantities of pork this fall and winter.

At the close on Thursday, the October lean hog contract closed at $74.78 per cwt carcass, up $1.66 per cwt from August. In the last nine years, the August average price for live hogs has been $3.79 per cwt higher in August than October. In carcass price, the August price has averaged $5.13 per cwt above October.

In the last 56 years, we have had eight times when hog prices in October have exceeded the August level. Those all were years when producers were decreasing production because of a cycle change and hog slaughter did not increase as much from August to October as normal. Even in 2004 with rapidly growing live hog demand, prices in October were substantially below August. The last time October prices have exceeded August for hogs was in 1990.

Barrow and gilt slaughter weights live in Iowa-Minnesota for last week at 265.7 pounds were down 1.3 pounds from a week earlier but up 1.1 pounds from a year earlier. We are probably approaching the lightest weights for the year. In 2006, the lightest weight for the year occurred the week ending August 5.

The Pork product price Thursday afternoon at $71.23 per cwt was down $3.09 per cwt from a week earlier. Feeder pig prices at United Tel-o-auction this week were $5-6 per cwt below two weeks earlier. The prices at United by weight groups were: 50-60 pounds $65-76.50 per cwt and 60-70 pounds $61 per cwt.

Slaughter this week under Federal Inspection was estimated at 1,992 thousand head, up 5.6 percent from a year earlier.

Issued by Glenn Grimes and Ron Plain

University of Missouri - Columbia

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