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Hog Prices, Pork Production Rise

Cash hogs fell Friday, after strong gains Monday-Wednesday.

Hog slaughter this week fell right where it should have.

USDA’s weekly packer survey suggested a 2.526-million head estimate. That comes from 457,000 today and 200,000 tomorrow. That was right next to our 2.529 estimate.

While the cattle industry is seeing much lower-than-expected kills, hog numbers are right on schedule. The week’s 4.9% year-over-year gain in slaughter must be balanced by the disruptions at Seaboard last week, which resulted in a Sunday kill this week.

This week’s larger-than-it-should-have-been kill was just under the year’s peak four weeks ago at 2.528. Allendale expects slaughter rates to rise over the next two to four weeks with a peak at 2.6 million. Pork production for the week increased to 531.5 million pounds.

The biggest issue of the week was that cash hogs went from meteoric daily gains to only slight gains. Monday through Wednesday saw daily gains from 0.09 to 0.30. They fell 36¢ yesterday. For today, there were too few to make it on the AM Iowa/Minnesota report. The same was also posted for the eastern Corn Belt report. The western Corn Belt report noted a loss of 0.12.

On the futures end, this market is priced as though the we will have no surge in supply in the weeks ahead. Cash hogs, as measured by the Lean Hog Index, are now at $69. December futures are only pricing in a $4 break.

In other news, Russia announced it had expanded its ban on food imports from the EU, Canada, and the U.S. They have now banned the imports of live hogs from these countries. The last time we sent a live hog to Russia was in 2014 when we sent over 2,738 head. Live hog exports are not a factor in price determination for U.S. hogs.

We still expect higher slaughter into November and lower demand, and lower prices. At this point we are still standing aside from selling for speculative trades. 

 

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Rich Nelson
Allendale Inc. 
815-578-6161

This material has been prepared by a sales or trading employee or agent of Allendale Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Allendale’s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

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