Plans by Smithfield Foods and Tyson Foods to reduce sows by a total of 47,000 may be a good start but according to economists is not nearly enough reduction to solve the problem facing the hog industry. Smithfield has said they will sell 27,000 sows and Tyson recently revealed plans for liquidating 20,000 sows.

The 47,000 sow reduction is less than 1 percent of the current U.S. breeding herd, according to University of Missouri economists Ron Plain and Glenn Grimes. The economists believe that the herd needs to be reduced an additional 7 percent to 10 percent from the June level.

The good news —  pork processor and retailer margins for the January-June period was up 10 percent —  the only segment of the industry that gained from higher retail prices. The bad news — packer margins for the period were down 6.7 percent from 12 months earlier. Live hog prices were also down nearly 8 percent in the first half of 2009 when compared to 2008.

Pork cutout Thursday at $64.85 per hundredweight was up $0.93 per hundredweight from a week earlier. Loins at $83.60 per hundredweight were up $2.79. Boston butts at $60.01 per hundredweight were down $5.89, hams at $52.52 per hundredweight were down $0.26 and bellies at $82.35 per hundredweight were up $2.16 from a week earlier.

The top live hog prices Friday morning were $0.50 - $2 per hundredweight higher compared to a week earlier. The weighted average negotiated carcass prices were $0.75 - $1.53 per hundredweight higher compared to seven days earlier. Slaughter this week under Federal Inspection was estimated at 2030 thousand head, down 4.7 percent from a year earlier.

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Source: University of Missouri