Hog markets steal spotlight

Hog markets steal spotlight

Hog prices soar on fears that PEDV losses will further tighten hog supplies.

Hog markets steal spotlight
TIGHT supplies in both the hog and cattle sectors are affecting the livestock markets as demand for red meat in general remains strong.

Still, there's no relief for tight supplies in sight as the combined U.S. and Canadian breeding inventories for both hogs and cattle were lower at the start of this year, according to a joint report released last week by the U.S. Department of Agriculture's National Agricultural Statistics Service and Statistics Canada showing data for both countries.

As of Jan. 1, 2014, Canada's total number of cattle was 0.7% lower than at the start of 2013, at 12.22 million; the calf crop also edged lower, at 4.86 million.

The total U.S. cattle inventory for the same time period was lower as well, coming in at 87.73 million, down 2%, while the calf crop for January to December 2013 came in at 33.93 million head.

The U.S. and Canada had a combined 99.95 million head of cattle and calves as of Jan. 1, down 2% from the previous year. Likewise, the number of all cows and heifers that have calved in both countries was down 1% to 43.12 million head (Figure 1).

Despite factors like lower feed costs, herd expansion in both the U.S. and Canada will be slow and reliant on refining profit margins not just for a few months but over the next few years as well.

Similar to the cattle inventory, the combined total hog inventory for the U.S. and Canada was down slightly to 78.7 million head in December 2013. The breeding inventory for both countries (Figure 2) was down 1% to 6.97 million head, and the number of farrowing sows during the period was also lower, at 7.08 million head.

The market hog inventory was pegged at 71.7 million head, which is a slight decline from December 2012.

The difference in the timing of porcine epidemic diarrhea virus (PEDV) occurrences between the countries is evident in the inventory numbers. Canada, which is just now reporting PEDV cases, actually had a marginal increase in its Jan. 1, 2014, all hogs and pigs inventory, at 12.7 million head, while the total inventory for the U.S. was lower, at 65.9 million head.

The hog markets were on a wild ride last week as fears of PEDV losses pushed hog prices higher, and, at times, lean hog futures traded up the limit.

According to Bloomberg, trading was more than doubled compared with the 100-day average for this time. The record prices appear to be a result of increasing concerns over future pork supplies, especially as new cases of PEDV are being reported.

At last Thursday's close, April hogs finished at $112.40, up $5.55 from the start of the week.

Last Monday, the pork cutout reached an all-time high for first-quarter prices at $106.27/cwt., and prices continued to climb throughout the week to reach $110.14/cwt. by last Thursday's close.

Putting this into perspective, current prices are only $5/cwt. below the record high established last June (Figure 3), according to the "Daily Livestock Report."

Typically, pork cutout values will increase between early March and late June. The "Daily Livestock Report" noted that at current levels, this trajectory would put the cutout value at around $125/cwt.

In addition, ham values start to increase in March as Easter approaches. Last week brought the first sign of such an increase, with ham values climbing to $90.33/cwt., growth of $4.27 for the week.

In order to secure enough supplies for retail outlets, packers were bidding quite aggressively.

Cash hogs also ended on a high note last week. The national average negotiated carcass price delivered to the eastern Corn Belt last Thursday averaged $101.82/cwt., and delivery to the western Corn Belt averaged $105.76/cwt.

In the middle of last week, Farm Progress analyst John Otte reported that the Chicago Mercantile Exchange's two-day lean hog index advanced for a 29th day, rising $1.44 to $102.31, which is just shy of the September 2013 high of $102.56.

At the end of trading last Thursday, hog slaughter for the week was estimated at 1.637 million head, a decline of 75,000 head from the year before.

The cattle market was mixed last week. Light trading was reported in all feeding regions, with live sales reported to be $2 lower than the previous week. The weather has hindered the movement of cattle to market.

The decline in cash fed cattle prices pressured cattle futures prices lower last week. The recent run of higher beef prices has hampered packing margins.

Still, beef wholesale cutout values climbed all of last week, with the Choice cutout up $1.07 to $235.58/cwt. and Select also up $1.07 to $233.00/cwt. at Thursday's close.

Last Thursday, USDA estimated total cattle slaughter for the week at 442,000 head, down 35,000 head from the previous year.

In the turkey markets, hens and retail-sized toms were steady last week, settling last Thursday at 98 cents to $1.04/lb. for hens and 97 cents to $1.04/lb. for toms.

For the chicken markets, near-record prices for whole chickens have continued since mid-January, settling at $1.0475/lb. for the Georgia dock last week. Breast meat finished slightly higher than the previous week at $1.83/lb. last Wednesday, while wings traded lower at $1.275/lb.

Egg prices were down last week in all regions. Large-sized eggs were $1.44-1.48/doz. in the Northeast, $1.50-1.53/doz. in the Southeast and $1.35-1.38/doz. in the Midwest.

Volume:86 Issue:10

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