Grimes and Plain Weekly Hog Outlook

CHICAGO - Feb 1/08 - SNS -- Following is a week ending hog market comment from the University of Missouri - Columbia's Glenn Grimes and Ron Plain.

Demand for pork at the consumer level in 2007 was up 2.6 percent based on

preliminary data. Live hog demand last year showed a strong growth of 3.6

percent from 2006. At least a portion of the stronger live hog demand than

consumer demand for pork was due to larger pork exports and population

growth.

All meats, with the exception of broilers, showed demand growth in 2007

from 2006. As indicated above, consumer demand for pork was up 2.6 percent,

beef up 0.6 percent, turkey up 3.3 percent, but broilers demand was down

1.4 percent in 2007 from 2006.

Live hog demand in the U.S. has performed very well since 1985. In these 22

years, live hog demand is 26.1 percent stronger than in 1985. Again, the

two factors responsible for most or all of this gain were pork export

growth and population growth.

This growth in demand for live hogs fueled growth in the North American hog

herd. Hog slaughter in 2007 was 29.2 percent above 1985.

The cold weather recently contributed to declining hog weights. For the

week ending January 26, barrow and gilt weights in Iowa-Minnesota declined

1.7 pounds from a week earlier and down 0.4 pound from a year earlier. The

average weight for the week ending January 26 was 260.6 pounds per head.

Gilt data for the last two weeks is at a level to get some reduction in the

herd if it stays at these levels. We are hearing about some sow

liquidation, but the sow slaughter data was below a year earlier in

December until the week ending January 19. For this week, sow slaughter was

up 10.4 percent after adjusting for herd size.

The futures market is offering the opportunity to forward price hogs in the

upper 50's live for February 2009. In mid weeks, the February 2009 contract

for lean hogs was 41 percent higher than the 2008 February contract. What

do the people trading lean hogs know that we do not? To get that price,

pork production will need to be down 8-13 percent or the same combination

of production reduction and demand growth that adds up to 8-13 percent.

Getting that much decline in the next 12 months seems highly unlikely,

especially with the futures market offering this level of price protection

or opportunity.

Pork product cutout rallied this week with the cutout Thursday afternoon at

$69.80 per cwt of carcass up $4.94 per cwt from a week earlier. Loins at

$73.14 per cwt were up $2.66 per cwt, Boston butts at $59.71 per cwt were

up $5.10 per cwt, hams at $52.21 per cwt were up $10.11 per cwt and bellies

at $78.21 per cwt were up $5.95 per cwt from a week earlier.

Hog prices gained strength this week with slaughter still relatively large.

Top live prices Friday morning were up $2-4 pre cwt compared to a week

earlier. Weighted average negotiated prices Friday morning were up

$1.15-2.66 per cwt compared to seven days earlier.

The top live prices for Friday morning for select markets were: Peoria $32

per cwt, St. Paul $37 per cwt, and interior Missouri $37.25 per cwt. The

weighted average negotiated carcass prices by area were: western Cornbelt

$53.31 per cwt, eastern Cornbelt $52.90 per cwt, Iowa-Minnesota $53.38 per

cwt and nation $53 per cwt.

Slaughter this week under Federal Inspection was estimated at 2,276

thousand head, up 11.1 percent from a year earlier.

Cash feeder pig prices this week at United Tel-O-Auction were steady with

two weeks earlier. All of the pigs were in the 50-60 pound range and sold

for $53.50-57 per cwt.

Issued by Glenn Grimes and Ron Plain

University of Missouri - Columbia

DISCLAIMER: Futures and options trading involve substantial risk. The valuation of futures and options may fluctuate, and as a result, clients may lose more then their original investment. In no event should the content of this website be construed as an express of an implied promise, guarantee or implication by of from the author(s) that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information on this page is derived from third parties and is deemed to be reliable. STAT Communications Ltd. accepts no responsibility for errors, omissions or inaccuracies in any of the material presented on this web site. Opinions expressed on this web site are those of the respective individuals and/or institutions and do not represent the opinions of STAT Communications Ltd. and/or STAT Publishing or its staff and/or management.