Grimes and Plain Weekly Hog Outlook

CHICAGO - Jan 18/08 - SNS -- Following is a week ending hog market comment from the University of Missouri - Columbia's Glenn Grimes and Ron Plain.

This week's hog slaughter was 2.419 million head, up 17.3% compared to

the same week in 2007. This was only the third week in history that

slaughter has exceeded 2.4 million head. Each has been in the last 5

weeks. Hog slaughter since the end of September has been up 8.8%

compared to a year ago. Over the last 6 weeks, hog slaughter has been

up 10.3% compared to a year earlier. A very effective vaccine for

circovirus and a breeding herd in early 2007 that was at least 5%

larger than the year before are our explanations for this surge in

slaughter. Unfortunately, these reasons give little hope for a

decline in slaughter anytime soon.

The week ended with hog prices little changed from seven days earlier.

The top price Friday at Peoria was $26/cwt, the same as the previous

Friday. St Paul was steady at $29/cwt. The interior Missouri top

Friday was $32, unchanged for the week. The national weighted average

carcass price Friday morning for negotiated hogs was $46.27/cwt, $0.87

higher than the previous Friday. Regional average prices on Friday

morning were: eastern corn belt $45.94, western corn belt $47.28, and

Iowa-Minnesota $47.29/cwt. Carcass prices are roughly $12 lower than

at this time last year. Most producers lost more than $30/head on

hogs sold this week.

The cutout value was a bit lower this week. The Thursday afternoon

USDA calculated cutout value was $55.29/cwt, down $0.40 from the

previous Thursday. Pork loins and Boston Butts were lower. Hams and

pork bellies were higher.

Given the huge supply, retail pork prices aren't doing badly. December

pork prices at retail averaged $2.859 per pound, up 9.1 cents compared

to 12 months earlier. Domestic pork demand ended 2007 on a strong

note. The growth in pork demand was stronger in the fourth quarter of

2007 than the other three quarters. This is a good lead-in to 2008.

Hopefully, high energy prices and rising unemployment won't disrupt

the trend.

The average carcass weight of barrows and gilts slaughtered the week

ending January 5 was 203 pounds, up 2 pound from the same week in

2007. The average for 2007 was 198 pounds, up 0.4 compared to 2006.

This was a bit smaller year-to-year increase than normal, but still

sizable given corn prices averaged more than $1 per bushel higher in

2007 than 2006.

Sow slaughter during the last 3 weeks of December and the first week

of January was down 2.5% compared to a year earlier, but appears to

have picked up in mid January. The word is that sow kill plants are

running close to capacity. Sow prices are low, especially for light

weight sows. Hopefully, this is an indication of a coming reduction

in the breeding herd.

The February lean hog futures contract ended the week at $54.97/cwt,

up $0.97 from last Friday. The April contract settled at $62.42

today, up $0.17 for the week. May closed the week at $71.65/cwt and

June settled at $75.45. The futures market continues to be optimistic

about late 2008. The December contract closed at $73.82, roughly

$18/cwt above where the December 2007 contract expired.

Issued by Glenn Grimes and Ron Plain

University of Missouri - Columbia

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