Grimes and Plain Weekly Hog Outlook

CHICAGO - Dec 9/07 - SNS -- Following is a week ending hog market comment from the University of Missouri - Columbia's Glenn Grimes and Ron Plain.

Last week's slaughter preliminary estimate shows 2,397 thousand head slaughtered and a new record high. There is a good chance that last week's slaughter was the largest for the fall of 2007. This is also a possibility that we have had the lower in prices for the year of 2007.

Negotiated weighted carcass prices for Friday morning, November 30, were from $1.31 to $5.12 per cwt above a week earlier. Prices for these same hogs were $0.89 to $1.51 per cwt higher Monday, December 3rd, then on November 30th.

One can never be sure the low in prices has been recorded until one gets through December for a season but the low often comes near the Thanksgiving holiday. Therefore, the odds appear good for hog prices to be basically sideways to up from here to the summer 2008 high.

Prices for live hogs in prior day purchased averaged $36.24 for the third week of November and $38.52 for the fourth week, which was last week's with what is likely to be the largest slaughter week of the year.

The futures market for live hogs in late week was offering a $53-54 price for live hogs for June 2008 with a relative wide basis. That price is between $16 and $17 per cwt above the live hog price for November 2007. In the last five years the June price has averaged $10.58 per cwt above the prior November.

If slaughter is close to current expectations next summer it will require demand growth similar to 2004 to get $53-54 live hogs in June of 2008. Another comparison is the current futures market is offering a price for June 2008 very close to the average for June for the years of 2003-2007. This seems highly unlikely with a projected slaughter of three percent plus or minus from 2007 in 2008.

Will the futures for the summer of 2008 increase from current levels during the seasonally increased price next spring? No one knows the answer to this question but the odds now appear low for this to happen. Anyone who cannot stand much more losses needs to look at what the futures market is now offering for all of 2008 for foreword pricing at least a portion of their hogs with the futures market or a packer contract tied to the futures market.

Demand for all meats but broilers for January-October was up from a year earlier. The demand at the consumer level for these ten months showed pork up 2.3 percent, beef up 0.9 percent, turkey up 3.4 percent but broilers demand was down 1.2 percent but improving from earlier in the year. For the first six months of the year broilers demand was down 3.2 percent.

Both live hogs and live fed cattle showed robust demand growth for January-October with live hogs up 3.2 percent and fed cattle up 3.7 percent.

Pork cutout for the week through Thursday at $58.94 per cwt down $1.35 per cwt from a week earlier. Loins at $66.75 per cwt, down $4.36 per cwt, Boston butts at $56.95 per cwt, up $1.09 per cwt, hams at $52.03 per cwt up $1.09 per cwt, bellies at $75.70 per cwt, down $1.46 per cwt from seven days earlier.

Cash live hog prices Friday morning were $1.00 to 3.75 higher compared to a week earlier. Negotiated weighted average carcass prices by geographic areas were $2.23-3.60 per cwt higher compared to seven days earlier.

The top live hog prices Friday morning were: Peoria $33.50 per cwt, St. Paul $33.00 per cwt and interior Missouri $37.25 per cwt. The carcass negotiated prices by area were: western Cornbelt $52.50 per cwt, eastern Cornbelt $51.62 per cwt, Iowa-Minnesota $52.51 per cwt, and nation $51.95 per cwt.

Slaughter this week under Federal Inspection was estimated at 2,383 thousand head, up 12.6 percent from a year earlier.

Issued by Glenn Grimes and Ron Plain

University of Missouri - Columbia

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