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Hog Slaughter: Biggest Week Since 1st of June

08/08/2014 @ 3:43pm

We stated before the week got going that a slightly higher slaughter would be seen this week then a big bump up next week. Well this week’s run came in bigger than (slightly higher). Adding in today’s 345,000 run and the 25,000 Saturday total puts numbers at 1.919 million. That is 52,000 head larger than last week. It is the biggest kill since the first week of June. Bulls also need to consider the fact that PED problems are waning as well. This week’s run was only 5.2% smaller than last year. With 4.8% heavier weights this week’s pork production was only 0.4% under last year.

With production “back to normal” now many will question about our pricing. Shouldn’t we therefore be near the prices from last year? Last year’s April expired at $102 with October at $91. Today’s prices are $12 over that for the August and $8 over for the October. While we certainly need a premium this year, due to the hole in beef production, the trade has some valid concerns even after this month-long break.

In June, we sent Russia 25 million lbs of our pork. That was 6% of our exports that month. This equates to 1% of our pork production. This will have the same price impact as though production just increased 1% overnight. In June, Russia was sent 59 million lbs. of chicken (9.6% of our exports). We will now have a little extra pork and a moderate increase in chicken at the meat counter. The chicken meat we send them is almost all dark meat. This abundance of lower end product left in the US could be an issue.

This market has fallen below our $104 target price for October futures that was discussed at the AgLeaders Summer Conference. December futures are now under the $92 price discussed. Producers are urged to hold their hedges discussed at the conference. That was a $110 put with a sold $117 call. We expect stability to come next week.


Rich Nelson 

Allendale Inc. 

815-578-6161

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