MANHATTAN, Kan. – Heavier hog weights may offset slightly smaller slaughter to hold first quarter 2001 prices near year-ago levels.
“With per capita pork supplies near a year ago, Iowa-southern Minnesota live weight barrow and gilt prices are expected to average from $38 to $41 per hundredweight, just slightly below the first quarter 2000 average of $41,” said James Mintert, livestock marketing specialist with K-State Research and Extension.
While hog prices will rise seasonally this spring, values are likely to stay under spring 2000 levels, he said.
More hogs will come to market this spring than a year ago, resulting in a 2.5- to 3-percent increase in hog slaughter, based on recent USDA farrowing data. As a result, Iowa-southern Minnesota prices in the mid- to upper-$40s are likely, down from last spring’s $50.63 average, the economist said.
The USDA data also showed that producers plan to farrow 3.9 percent more pigs this winter than they did a year ago.
“Assuming pigs per litter increase modestly from last year’s level, slaughter next summer could easily increase 4 to 5 percent compared to summer 2000,” Mintert said. “If that’s the case, barrow and gilt prices in the Iowa-southern Minnesota market next summer could average from the high $30s to the low $40s.”
Hog slaughter and prices next fall are much harder to predict, Mintert said.
Surprisingly, Mintert said, after indicating such an increase in winter farrowings, producers indicated they plan to increase the number of sows farrowed this spring by just 1 percent, compared to the spring of 2000. If producers hold to that, it implies hog slaughter this fall will increase just 2 to 2.5 percent compared to fall 2000.
But it would be surprising if spring farrowings turn out to be that small, he said.
“Since [hog] prices will be profitable for nearly all hog producers between now and spring, a more likely scenario is that spring farrowings will be large enough to support a year-to-year fall quarter slaughter increase of at least 4 to 5 percent,” Mintert said.
“The difference between these two scenarios is significant,” he said, noting that if the first scenario prevails, industry should be able to handle the slaughter volume.
If the second scenario materializes, however, slaughter will be within 2 percent of the fall 1998 record-large numbers and will prove a “severe test” of meat packers’ capacity.
“Assuming slaughter does increase 4 to 5 percent this fall, compared to fall 2000, widening spreads between live hog and wholesale pork values will likely result in Iowa-southern Minnesota hog prices averaging in the upper $20s,” the economist said.
“In contrast, if the farrowing intentions turn out to be a more accurate indicator of hog slaughter this fall, the October-December price average could wind up in the low- to mid-$30s.”
Longer term, if Chicago Mercantile Exchange hog futures are truly an indicator of cash hog prices to come, producers should return to modest profitability in early 2001, Jones said.
CME February lean hog carcass futures closed at 57 cents per pound on Jan. 5, and April settled at 58 cents. That translates to a live price projection in the $43 per cwt area. Exchange June lean hogs settled near 64 cents, which put early summer cash hog projections in the $44 to $45 area, Jones said.