Hog runs have been huge in recent weeks at a time when pork demand has been soft. Thus, sharply lower hog prices. Domestic pork demand during July was down 0.6%. Export demand was down 2.7%. Live hog demand in July was down 0.5%. August demand calculations won’t be made for several more weeks when the August trade data becomes available, but some signs are encouraging. Retail pork prices averaged $3.526 per pound during August. This was up 9.2 cents from July, up 1.4 cents from August 2011, and the second highest month ever, behind September 2011.
The average live price for 51-52% lean slaughter hogs in August was $63.51/cwt, down $6.42 from July, and down $8.14 from August 2011.
Last week’s hog slaughter was the third largest ever. This week’s kill is the fifth largest ever. Hog slaughter this week totaled 2.406 million head, down 0.9% from the week before, but up 5.0% compared to the same week last year. Over the last six weeks hog slaughter has been 5.5% above year-ago and 4.2% above the level implied by the June hog inventory survey. Look for some big upward revisions next Friday in past inventory numbers when the September Hogs and Pigs Report comes out.
The average barrow and gilt live weight in Iowa-Minnesota last week was 268.0 pounds, 1.6 pounds below a week earlier and down 0.4 pounds from a year ago. This is the first below-year-ago week for Iowa-Minnesota weights since the week ending on November 12, 2011. Weights were above year-ago for 42nd consecutive weeks. The weather has been mild, so it appears likely the weight decline is due to producers trying to avoid high feed costs by marketing hogs earlier. This may also explain part of the big daily hog runs.
After six down weeks, hog prices were sharply higher this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $70.18/cwt, up $6.63 from last Friday. The western corn belt average price this morning was $68.63/cwt. The eastern corn belt averaged $70.25/cwt and Iowa-Minnesota averaged $68.87/cwt on the morning report. Peoria had a top live price this morning of $46/cwt. Zumbrota, MN topped at $48. The top for interior Missouri live hogs Friday was $47.50/cwt, up 75 cents from the previous Friday.
The Thursday afternoon calculated pork cutout value was $77.43/cwt, down 5 cents from the previous Thursday, down $15.37 from six weeks earlier, and $20.08 lower than a year ago. Loins and bellies were lower this week; hams and butts were higher.
Higher hog prices caused the packer pork gross margin to shrink this week. Today’s hog price is 90.6% of cutout value.
Hog futures were higher this week. Friday's close for the October lean hog futures contract was $75.80/cwt, up $1.78 from the previous Friday. December hog futures ended the week $1.07 higher at $74.97. February hogs settled at $81.20/cwt.