Grimes and Plain Weekly Hog Outlook

CHICAGO - Mar 14/08 - SNS -- Following is a week ending hog market comment from the University of Missouri - Columbia's Glenn Grimes and Ron Plain.

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Based on a study just completed by the University of Missouri funded

by the National Pork Board and University of Missouri, the percent of

hogs sold on the spot market in the U.S. increased a little from 2007.

The 2008 increase follows an increase in the rate of decline in 2007

from 2006. However, we believe a substantial portion of the decrease

was due to the USDA categorizing the hogs sold by farmer-owners of

Triumph Foods in Missouri and Meadowbrook farms in Illinois as packer

sold hogs. Some of these hogs were probably sold on the spot market.

In 2006, the packer sold hogs amounted to 2.6 percent of the hogs

reported by USDA. In 2007, the packer sold hogs amounted to 6.7

percent and held at 6.1 percent in 2008.

The spot market amounted to 10.2 percent in 2006, 8.6 percent in 2007

and 9.2 percent in 2008. We believe the number of hogs sold on the

spot market is sufficient to represent actual supply and demand

conditions and result in a fairly accurate price for hogs to tie

marketing contracts to. This belief is based on the fact that packers

margin have not indicated that they are purchasing hogs at prices

much, if any, below their value based on actual supply and demand

conditions.

The Mandatory Price Reports data include percent lean, carcass

weights, base price and net price for each marketing arranged type.

The spot market or negotiated price hogs had the second lowest average

percent lean and the lightest average weights. The other market

formula hogs (contracts tied to the futures markets) had the highest

average carcass weights at 209 pounds and the highest base and net

prices. The packer-owned hogs had the lowest percent lean. This data

was for January 2008.

USDA current estimate of pork production in 2008 shows an increase of

5.4 percent from 2007. This is very close to our current estimate for

2008 production.

USDA current estimate for pork imports in 2008 is for a decrease of

4.4 percent from 2007. However, the current USDA estimate is for pork

exports to increase again in 2008 by 15.8 percent from 2007. If this

occurs, it will be the 17th consecutive year for record high exports.

With pork production in 2008 likely to be up between five and six

percent, we expect live hog prices negotiated in Iowa to average

between $41-44 per cwt. The lean hog futures price in mid-week was

offering a live price in the mid $50 per cwt for June 2008 through

April of 2009. The odds are very high that the demand for live hogs

will not grow enough or slaughter decline enough to get close to the

prices currently being offered for hogs by the futures market in the

coming year.

The pork cutout per cwt of carcass this Thursday afternoon at $56.79

per cwt was down $2.31 per cwt form a week earlier. Loins at $74.99

per cwt down $0.38 per cwt, Boston butts at $56.56 per cwt up $0.33,

hams at $41.32 per cwt down $5.03 per cwt and bellies at $66.23 per

cwt down $7.31 per cwt from seven days earlier.

Live hog prices Friday morning were $1.00 to $2.25 per cwt lower

compared to a week earlier. Weighted average carcass prices Friday

morning were $1.24 to $2.60 per cwt lower compared to seven days

earlier.

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

$31.00 per cwt, St. Paul $34.00 per cwt and interior Missouri $35.75

per cwt. the weighted average negotiated carcass prices were: western

Cornbelt $49.98 per cwt, eastern Cornbelt $47.02 per cwt,

Iowa-Minnesota $49.53 per cwt and nation $47.98 per cwt.

The average weight of barrows and gilts in Iowa-Minnesota last week

was at 267. pounds up 0.2 pound from a week earlier but down 1.6

pounds for a year earlier.

Slaughter this week at 2269 thousand head up 1.9 percent from a week

earlier and up 6.3 percent from a year earlier.

Pork exports in January was a record high for a month up 3 percent

from the previous record in November 2007 and up 26.6 percent from

January 2007.

Cash feeder pig prices this week at United Tel-O-Auction were a little

higher than two weeks ago. 50-60 pound pigs this week were $81-90 per

cwt and 60-70 pounds sold from $56.81 per cwt.

Issued by Glenn Grimes and Ron Plain

University of Missouri - Columbia

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