Weekly Hog and Cattle Report May 9, 2008<

Hog Outlook

Glenn Grimes & Ron Plain,
University of Missouri - Columbia
May 9, 2008

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Personal contact with people in the pork marketing sector continue to support the belief that containers are slowing the shipment of pork into the export market.

Also supporting the shortage of containers is the cold storage stocks that set a record high at the end of February. They broke that record at the end of March.

The product market price has gone almost straight up in the past month, which usually does not happen with cold storage stocks that are not already committed.

Even though the consumer demand for pork domestically in last couple of months with available data shows weakness, late April and May prices for hogs and pork products suggest the probability that domestic consumer demand may be stronger than indicated. These stronger prices, which now are above year’s earlier level with slaughter, for the past four weeks have been up between twelve and thirteen percent. Regardless, we have an unbelievable strong demand whether or not it is only export demand growth or a combination of export and domestic demand growth.

Pork product prices pushed higher again this week even with large slaughter. The cutout per cwt of carcass on Thursday afternoon was at $78.71 per cwt up $4.33 per cwt from a week earlier. Loins were at $107.83 per cwt up $3.16 per cwt, Boston butts were at $84.35 per cwt up $6.39 per cwt, hams were at $59.78 per cwt up $5.58 per cwt and bellies were at $90.98 per cwt up $6.00 per cwt from seven days earlier.

The percent of the corn crop planted in the U.S. as of May 4 was 27; this compares with 45 percent last year and 59 percent for 2003-2007. With the big decline in corn acreage, indicated by the March 3rd planting intention, we need at least normal yields or the pain of high corn prices will be even more severe. If now looks like we will need to get corn prices high enough to close some ethanol plants for some period. With the current prices for gasoline, that would probably be between $7-8 per bushel.

Cash hog prices Friday Morning were $2-5 per cwt higher compared to a week earlier. The weighted average negotiated carcass price were up $5.47-7.02 per cwt compared to seven days earlier.

The price for live hogs at select markets were: Peoria $50 per cwt, Zumbrota, Minnesota, $56 per cwt and interior Missouri $55.

The weighted average carcass price Friday morning for negotiated hogs by area were: western Cornbelt $78.02 per cwt, eastern Cornbelt $76.77 per cwt, Iowa-Minnesota $78.10 per cwt and nation $77.06 per cwt.

Slaughter this week under Federal Inspection was still up 7.7 percent from a year earlier at 2089 thousand head but the smallest full week slaughter since September of last year.

The average weights of barrow and gilts in Iowa-Minnesota were at 263.7 pounds for last week; down 0.9 pound from a week earlier and down four pounds from a year earlier. This data supports the probability that some of the large slaughter the last few weeks is due to pulling markets forward.

Feeder pig prices at United Tel-O-Auction this week were steady to $6 per cwt above two weeks ago. The prices at United by weight groups were: 50-60 pounds $70.50-74.50 and 60-70 pounds $61.00 per cwt.

Weekly Cattle Outlook: Grimes and Plain (Apr 21, 2008)

Beef and veal exports in February were up 30.5 percent from a year earlier. Beef imports in February were down 14.5 percent from twelve months earlier. Because of the increase in exports and decline in import the net impact of beef as a percent of beef production in the U.S. declined from 6.9 percent in 2007 to 3.7 percent in 2008 for February.

Beef and veal exports for January-February of 2008 were up 32.8 percent from 2007. Beef imports for these two months were down 17.6 percent from a year earlier this year. As a result of the increase in exports and decline in imports, the net beef import as a percent of beef production declined from 7.7 percent in 2007 to 4.1 percent in 2008. This is the major reason for the demand for live fed cattle in December-February being up 1.8 percent with consumer demand for beef down 2.6 percent.

The purchase of beef and veal by country in January and February were: Mexico up 12.6 percent, Japan up 22.3 percent, Canada up 71.7 percent, South Korea up 186.2 percent, Taiwan up 20.4 percent, Hong Kong up 11.2 percent, Vietnam up 2071.7 percent, Bahamas down 13.5 percent, and other countries up 1.8 percent from 2007.

Live feeder cattle imports from Mexico in January and February were down 9.3 percent and live cattle imports from Canada were up 45.4 percent from a year earlier. Total live cattle imports from Canada and Mexico in January and February were up 28 percent in 2008 compared to 2007.

The trade estimate for the April 1 cattle on feed report is for the on feed number to be 1.3 percent above a year earlier. If the number is above a year earlier, and the odds appear high for this to happen, it will be the fifth consecutive month for numbers on feed to be above a year earlier.

The good news is the placements of feed during March are expected to be down 8.1 percent from twelve months earlier. This will be the first significant decline in placements on feed since August 2007. Retail Choice beef prices in March at $4.205 per pound up 0.5 percent from a month earlier and a year earlier.

Feeder steers and heifers steady to $2.00 per cwt higher after a steady open. Steer and heifer calves not well tested, few sales $1-3 per cwt lower at Oklahoma City this week compared to seven days earlier.

The range in prices for the medium and large frame Number One steers were: 400-500 pounds $124.25-130 per cwt, 500-600 pounds $112-124.50 per cwt, 600-700 pounds $104-111 per cwt, 700-800 pounds $102.25-110.75 per cwt, and 800-1000 pounds $86-95 per cwt.

The weighted average live price for fed cattle for the five-market area for the week through Thursday at $89.80 per cwt up $3.20 per cwt from last week. The weighted average carcass price for the five-market area through Thursday at $143.92 per cwt up $4.92 per cwt. Wholesale beef strengthened this week with Choice beef Friday morning at $151.07 per cwt up $7.87 per cwt from a week earlier. Select beef at $148.81_ per cwt up $6.76 per cwt from seven days earlier.

Slaughter this week under Federal Inspection estimated at 676 thousand head up 3.7 percent from a year earlier.

The April 1 cattle on feed report came in some more positive than the trade estimates. According to USDA, the number on feed was up 0.3 percent, the trade estimate was for a 1.3 percent larger number then twelve months earlier. Placements on feed during March were down 11.4 percent compared to a trade estimate down 8,.1 percent and fed marketings down during March were down only 0.1 percent compared to a trade estimate of down 2 percent from a year earlier.

DISCLAIMER: This commentary is for informational purposes only. The opinions and comments expressed herein represent the opinions of the author--they do not necessarily reflect the opinion of the DeKalb County Farm Bureau. This commentary is not intended to provide individual advice to anyone. DeKalb County Farm Bureau will not be liable for any errors or omissions in the information, or for any damages or losses in any way related to this commentary.