Meat Industry INSIGHTS Newsletter

990103 Hog Prices Rally on USDA Report

January 2, 1999

Chicago - Hog prices staged a strong rally Wednesday following a quarterly report from the government Tuesday that gave the first indications that swollen U.S. pork production may be peaking.

In other commodity markets, corn prices led grains lower on the weaker outlook for feed usage next year and on good growing weather in South America. Oil prices closed mixed after a weekly industry report on U.S. oil stockpiles.

At the Chicago Mercantile Exchange, prices for lean hog futures for the summer of 1999 jumped the 2.00-cent-per-pound daily limit from the opening bell before easing back slightly by the close of trading.

June hogs closed 1.575 cents a pound higher at 49.325 cents while February hogs rose 0.95 cent a pound at 33.25 cents.

The government's quarterly pig crop estimates issued late Tuesday put the current hog herd in the United States 2 percent above a year ago at 62.2 million as of Dec. 1.

However, that figure was also down 2 percent from the government's Sept. 1 estimate. Moreover, the size of the breeding herd dropped 4 percent from a year ago at 6.67 million animals, the most important number in the report.

The outlook for fewer pigs born this winter due to the smaller breeding stock drove summer hog prices higher, a breath of fresh air for hog producers now struggling with the lowest cash hog prices in more than 50 years.

“I can lock up $40 to $42 (per hundred pounds) live right now from July 1999 to April 2000,” said Dave Maher, livestock market analyst with Securities Corp. of Iowa.

Maher said those prices should net efficient hog producers profits of $7 to $9 per hundred pounds and less efficient producers $2 to $4. At current hog prices of $15 to $18 per hundred pounds, producers are losing $15 or more for every hundred pounds they sell, he said.

The pig crop estimate also affected corn trading Wednesday, with the outlook for fewer hogs sparking sales in the Chicago Board of Trade corn trading pit. Corn for March delivery ended down a sharp 5-1/4 cents a bushel at $2.13-1/2, the lowest close since Aug. 31.

“The Hog and Pig report is saying that the government will reduce feed usage in its January (crop) report,” Maher said.

This Article Compliments of...

Iotron Technology Inc.

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