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Big Producers Make up Pig Losses with Heavier Weights

Steve Meyer

November 25, 2013

4 Min Read
Big Producers Make up Pig Losses with Heavier Weights

First, please accept the best wishes of the Meyer family and all of us here at Weekly Preview for a happy and safe Thanksgiving holiday to you and yours. There are so many things for which to be thankful. It’s a shame that we don’t stop to “count our blessings” more often, but let’s make sure to at least do so this week. High on my list is my long-standing relationship with National Hog Farmer. I’ve read this magazine since I was a teenager trying to learn about the animals I had chosen as my primary FFA project. I never dreamed I would one day contribute to the education and information mission of this great magazine. It has been an honor and an even greater honor that you would devote a few precious minutes to this column each week. Thank you.

As can be seen in Figure 1, it is pretty difficult to judge whether last week’s federally inspected slaughter total of 2.345 million head was a break from this fall’s “shortage” pattern or not, since it aligns with Thanksgiving week one year ago. We’ll have to wait for this week’s total and then compare the past two weeks to the same period last year before we know for certain. But my guess is that we are going to remain 50,000 to 70,000 head below the level I expected coming out of the report.

hog slaughter, nov 25

We have gotten a bit closer to those expected levels in recent weeks, and last week’s 0.45 pound reduction in the average weight of producer-sold barrows and gilts suggests that producers are getting a bit more current in their marketings now that cash prices have fallen. But “a bit more current” and “current” are two different things. Further, a normal level of currency is probably not in the cards this year. A coming “hole” in hog availability is driving Seaboard, Smithfield and other partially-integrated operations to make up for pig losses with higher weights that have pushed the average weight packer-owned hogs to 217 lb. the past two weeks. The non-integrated companies aren’t in that pickle yet. But it doesn’t look to me like anyone will be able to completely dodge the porcine epidemic diarrhea (PED) virus supply bullet.

Cattle Report Helps Pork

November’s Cattle On Feed report came in just about as expected and indicated significantly higher cattle placements than one year ago. Of course, October 2012 placements were the lowest for that month in years so it is little surprise that this year’s placements were higher. But feedlot inventories are still lagging year-ago levels by 5.7% indicating that fed cattle supplies will lag year-earlier levels well into 2014. And there simply are not very many feeder cattle available with heifer retention picking up. Our thoughts are that per capita beef supplies will decline 4-6%, year-on-year, in 2014, keeping beef prices VERY high and giving pork a real, though perhaps diminished by PED virus, opportunity to change some buying habits.

Frozen Meats Positive for Pork

October 31 stocks of frozen meat and poultry were virtually unchanged from one year ago and were down 3.1% from Sept. 31. Pork led the decline with frozen pork inventories declining 6.1% from last year and 0.2% from Sept. 30. The October decline is unusual and a reflection of lower-than-expected September slaughter. We expect stocks to grow in November but by a smaller-than-normal amount, leaving pork inventories at a good level once the fall run is over. Ham inventories remained larger than last year but were down 13% for the month. “Unclassified” and “Other” pork categories were the largest tonnage contributors to October’s year-on-year decline with butts and trimmings not far behind. Bellies inventories were up sharply from last year’s very low level.

USDA cold storage report

 

Chicken Concerns

Chicken stocks are a bit of a concern, with total chicken inventories being 8.2% larger than last year, and 6.3% larger than last month, just as the industry appears to be moving into full-fledged expansion. Breast meat inventories increased by 17.5% in October, suggesting some very competitive prices this fall.

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pork industry data

 

competing meats, Nov 25

About the Author(s)

Steve Meyer

Partners for Production Agriculture

Steve Meyer joins Kerns and Associates, Ames, Iowa. As Kerns team member, Meyer will be speaking, developing and delivering economic data and analyses, and working with our clients to provide critical perspectives as they benchmark and drive risk management decisions.

Previously, Meyer served as vice president of Pork Analysis for EMI. Meyer conducted ongoing analysis of hog and pork markets. In a former role, as president of Paragon, he also monitored and analyzed cattle, beef and poultry markets to meet the needs of his diverse set of clients. He served for 12 years as an author of The Daily Livestock Report sponsored by CME Group, an e-newsletter whose circulation grew steadily following its introduction in 2003. In addition, he writes a feature article for National Hog Farmer’s NHF Daily e-letter that focuses on economic issues in North America’s swine/pork sector.

Prior to founding Paragon Economics, Meyer served as director of Economics for the National Pork Producers Council and National Pork Board from 1993-2002. In that capacity, he provided economic counsel to producers and NPPC/NPB staff and coordinated staff and consultants’ activities regarding meat industry production and price forecasts and the economic impact of pork production and processing. He also administered NPPC/NPB programs dealing with marketing and pricing systems, industry structure, coordination and competitiveness. Since leaving the NPB staff, Meyer has served as the organizations’ consulting economist. In addition, he spent three years as an assistant professor in the agriculture economics department at the University of Missouri.

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