Hog slaughter fell about 9 percent short of the comparable 2013 total for a second straight week when the six-day estimate was posted on July 18, thereby implying industry expectations for 8 to 10 percent reductions during July and August are right on target. Forecasts for this week are about 8 percent below last year, so it’s pretty clear that the hog shortage will persist during the days and weeks just ahead.
Conversely, hog weights remain extremely high by summer standards. Iowa-Southern Minnesota pigs marketed last week averaged 284.3 pounds/head, which topped the comparable 2013 figure by a whopping 13.7 pounds/head. Of course, heavier hogs don’t produce more ribs or hams, but pork production totals are benefitting from the higher weights.
Hog futures have fallen to increasing discounts below spot values despite the shortage. The CME index peaked at 134.17 cents/pound on July 16 and is now declining. Futures are dropping even more quickly. This strongly suggests growing industry pessimism about demand strength in late summer and beyond. Given this rather drastic shift in sentiment, we are sticking with previously established hedges at this point.
Editor’s Note: Dan Vaught is a livestock economist for Doane Advisory Services, St. Louis, Mo. Doane distributes a number of timely, relevant newsletters to farmers that contain expert commentaries and market advice. For more information, call 314.569.2700 or go to: www.Doane.com.