Hog futures traded lower on reports of higher hog slaughter and weaker wholesale prices. Hog slaughter was up 1.7% from the same period last year. Producers are expected to market hogs more aggressively, which could lead to lower slaughter levels in April compared to the previous year. Hog carcass weights remain below last year's levels, indicating producers continue marketing hogs at lighter weights. Uncertainty around export demand due to closed markets in Russia and China is negatively impacting hog prices.

1. Sponsored by
Vol. 11, No. 43 / March 5, 2013
HOG SLAUGHTER, 7-DAY ROLLING TOTAL, OCT - MAY
Market Comments 000 hea d
Latest Data Value is for March 4, 2013 (7-day total = 2.189 mil head)
2,700
Hog futures traded lower on Tuesday on weak wholesale
2,500 2012-13
prices and reports of producers becoming more aggressive in
their marketings. Hog slaughter picked up last week and the
seven day total (through March 4) stood at 2.189 million head, 2,300
2011-12
1.7% higher than the same period a year ago. The expectation is
for hog slaughter to drift lower into April but futures at this 2,100
point have removed all the normal seasonal premiums. April
lean hog futures closed last night at $80.300/cwt, 83 points lower 1,900
+3.2% vs. 2012
2010-11
than the previous close and about $10/cwt lower compared to Thanksgiving
where prices stood at the end of January. April lean hog futures 1,700
are now trading at a discount to current cash IA/MN prices. The
expectation is for slaughter to hover near or even slightly below X-mas & New Year
1,500
year ago levels through the end of March and into April. If pro- Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Apr-1 May-1
ducers are indeed pulling marketings forward, we could see April
slaughter decline compared to year ago levels. Hog weights con-
tinue to track below last year’s levels, an indication that produc- Hog Carcass Weights, 7-day Moving Average
Base on Daily MPR Report, LM_HG201. Updated through Mar. 1, 2013
ers remain relatively current in their marketings. If anything, 211.0
more aggressive marketings will continue to limit hog carcass
weight gains. The latest data from the MPR report (we use a 7- 209.0
day average of LM_HG201) shows hog carcass weights at 208
pounds per carcass, 0.4% below year ago levels.
dressed carcass wt in pounds
207.0
2013
While hog supplies do not appear burdensome 205.0
2011
compared to year ago levels, the big question going into
the spring remains the state of pork demand. For US pork, 203.0
export demand is particularly important, with almost 1 out of 4 2012
pounds of pork going to other markets. Russia has now com- 201.0
pletely closed its market to US beef and pork while China re-
quires that a third party verify that US pork is free of ractopa- 199.0
mine. Losing sales to the lucrative Russian market is significant
as product now has to be sold at a discount to other markets or 197.0
sold at lower prices through domestic channels. Reduced product
flow to China because of the increased testing also has negative-
ly impacted pricing for items that traditionally go to these mar-
US economy following heated budget battles. Real personal dis-
kets. Russia used to be a big buyer of US hams and frozen pork
posable income in January rose jut 0.6% in January, well below
trimmings while China accounted for about a third of all US pork
the 2% long term benchmark, while the savings rate dipped to
variety meat exports in 2012, paying a significant premium over
2.4%, an indication that consumer spending will remain
the domestic market and many other export markets. The com-
strained. Most metrics that we have seen, both from retail and
bined impact of the closing of the Russian market and the slow-
foodservice establishments point to slower sales compared to last
down in product flow to China clearly has negatively impacted
year. Some of this may be due to weather (last year was particu-
current and future hog values and also reduced the chance that
larly warm) but we also think it reflects the uncertainty in
producers will see any profits for the remainder of the year.
broader macro markets and the reality that consumer spending
Domestic pork demand remains constrained on account of weak
will remain constrained going forward.
income growth and growing uncertainty about the state of the
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