Grimes and Plain Weekly Hog Outlook

CHICAGO - Jan 4/08 - SNS -- Following is a week ending hog market comment from the University of Missouri - Columbia's Glenn Grimes and Ron Plain.

The 2007 broad-based energy bill has the potential to impact farm

markets and crop production decisions for years to come.

Congress' ultimate goal is for the nation to use 36 billion gallons of

renewable fuels by the year 2022. According to plans in the bill,

corn-based ethanol production will peak at 15 billion gallons per year

in 2015 and stay at that level. This will mean roughly doubling the

current corn-based production capacity.

Building that much more corn-based production facilities is not the

most challenging aspect of reaching the goal. It will be producing

enough corn to keep these plants supplied without shortchanging other

corn users such as the pork industry and supplying acres for other

crops.

In fact, the current mid-$4 per bushel corn futures price is not due

to the current supply of corn based on 2007-2008 marketing year needs,

but the battle for acres with soybeans for the 2008 crop year.

The cost for producing hogs in the U.S. in 2008 is likely to be in the

low-$50 per cwt for the average-cost producer. With hog prices

expected to average in the low- to mid-$40 per cwt live for 51-52

percent lean hogs this year, the average-cost producer will lose money

most of the year unless they have taken advantage on the prices for

hogs in the futures market or have marketing contracts tied to grain

prices.

We still see no signs that producers have started reducing the

breeding herd. Therefore, the time between when producers start losing

money and producers reduce production may be longer than in the past

due to the current structure of the production segment of the

industry.

Based on data from Iowa State University, hog producers lost money in

March of 2007 but then had good profits during the summer months. In

the past, the time elapsed from the start of losses until production

was reduced was 15-16 months. If we reduce production in 15 or 16

months, we would see less marketings by the summer of 2008. However,

the December Hogs and Pigs report indicates production throughout the

year of 2008 will be above year-earlier levels.

Live barrow and gilt weights in Iowa-Minnesota last week at 271.1

pounds were up 2.6 pounds from a week earlier and up 1.3 pounds from a

year earlier. Weights are likely to increase again this week due to

the January 1 holiday-shortened slaughter week.

Pork cutout per cwt of carcass Thursday afternoon at $56.26 per cwt

was down $2.33 per cwt from a week earlier. Loins at $74.62 per cwt

were down $0.89 per cwt, Boston butts at $62.25 per cwt were down

$0.10 per cwt, hams at $37.26 per cwt were down $3.44 per cwt, and

bellies at $71.25 per cwt were down $1.91 per cwt from seven days

earlier.

Live hog prices Friday morning were $1.00-$2.00 per cwt lower compared

to a week earlier. Weighted average carcass prices Friday morning were

$1.80-$2.21per cwt lower compared to seven days earlier.

The live top prices Friday morning for select markets were: Peoria

$29.00 per cwt, St. Paul $30.00 per cwt and interior Missouri $32.50

per cwt.

The weighted average negotiated carcass prices Friday morning were:

western Cornbelt $47.12 per cwt, eastern Cornbelt $44.53 per cwt,

Iowa-Minnesota $47.17 per cwt and nation $45.81 per cwt.

Slaughter this week under Federal Inspection was estimated at 2009

thousand head, up 8.9 percent from a year earlier.

Issued by Glenn Grimes and Ron Plain

University of Missouri - Columbia

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