Hog Prices Seen Working Higher

In what is perhaps a boost for cattle producers, a well-known hog market economist is predicting a continued rise in hog prices for at least the next few weeks, albeit at a slower pace.

Ron Plain, agricultural economist at the University of Missouri, said in an article for the National Hog Farmer the pace of price increases was likely to slow, the odds were good that there are a few more weeks of price increases ahead, possibly even surpassing the Feb. 20 peak.  But rising production could throttle price increases this summer.

So far this year, there have been long stretches where prices have trended up or down with few bumps, Plain said.  The national average barrow and gilt base carcass price started the year at $52.51 per cwt and climbed for 26 of the next 34 market days, reaching $73.95 on Feb. 20.

From there, the national average price declined on 38 of the next 45 market days to a low of $53.45 per cwt on Apri9l 24, he said.

From there, prices have moved rapidly higher.

 

HOG PRICE HAS ROOM

 

The current ratio of hog prices and the pork cutout value leaves room for higher hog prices, Plain said.

Historically, carcass hog prices have averaged 92% of the pork cutout value, but hogs dropped to 55.4% of the cutout the week of Thanksgiving.  Last week, hog prices were 79% of the cutout.  So, the current cutout would support $10 per cwt higher hog prices, he said.

However, year-to-date pork production is up 3% from the same period a year earlier with weekly production over a year ago each week since the first week of the year, USDA data show.  This is a recipe for disaster, Plain said, were it not for two new slaughter plants in Sioux City, Iowa, and Coldwater, Mich., opening sometime this summer.

As it is, it will be a challenge for packers to move the record pork production at a pace that will keep hog producers afloat, he said.

To keep it going, a large chunk of this year’s record pork production will have to move into export channels, Plain said.  This is being done with US pork exports up 17.1% during the first three months of 2017, and weekly data indicate April’s exports remained strong as well.

 

BEEF SUPPORTING PORK

 

Unexpectedly high beef prices thus far this year were credited with supporting pork prices, Plain said.  The most recent cutout values have been the highest since early 2015.

That may underpin the seasonal push in spring and summer hog prices.  Over the last 10 years, the average negotiated base carcass price on the first weekday of April was $72.45 per cwt, up $6.40 from March; by the start of July, it was $83.92.

 

CASH CATTLE QUIET

 

After trading on the livestock exchange last Wednesday at an average of $138.40 per cwt on a live basis, down $1.75 from $140.15 a week earlier, fed cattle began to trade in the Plains.

Cash cattle traded at $138 to $138.50 per cwt live on Wednesday, but the volume came at $138, down $2 to $3.50.  Thursday, more traded down to $136.

Dressed-basis trade was down $9 to $10 at $220 per cwt.

The USDA’s choice cutout Tuesday was up $0.48 per cwt at $249.88, while select was off $1.11 at $224.39.  The choice/select spread widened to $25.49 from $23.90 with 86 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $142.20 per cwt, down $0.78.  This compares with Tuesday’s May settlement at $140.95, down $1.57.