CME: Pork Supplies Stay Lower Than a Year Ago21 October 2013
US - So what did the USDA numbers tell us about the state of beef and pork supplies and some of the price trends in the spot market? Both cattle and pork supplies remain lower than a year ago, which has so far helped underpin pork and beef prices, according to Steve Meyer and Len Steiner.
There are some issues with the supply data, however, which bear watching. Total hog slaughter for the week was estimated at 2.297 million head, 3.56 per cent lower than a year ago. Hog slaughter has been increasing in the last few weeks, which is not unusual for this time of year. The data continues to imply that the USDA Hogs and Pigs report underestimated the supply of hogs on the ground, at least for the first marketing window.
Total pork production was estimated at 467 million pounds, down 3.8 per cent lower than last year. We think this is an estimate that will most likely be revised higher in the coming weeks. The hog carcass weight number is currently pegged at 203 pounds, which is most certainly incorrect. The chart below shows our tracking 7-day moving average of hog carcass weights based on the MPR data. Note that we had to make some estimates but we think the number is pretty close.
USDA quoted the weighted average hog carcass weight for Thursday (both produer and packer hogs) at 209.5 pounds per carcass. To come up with an estimate for the whole week, we went back and looked at the normal relationship of weights for other days in the week to Thursday weights (weights tend to be heavier on Thursday and Friday).
For the week, we estimate the average hog carcass weights at 208.8 pounds per carcass. If this number is correct, it implies weights that are about 2 per cent higher than a year ago. This kind of weight increase is consistent with the ramp up in weights in late September. It also implies that producers may be a bit behind in their marketings, which is understandable considering the uncertainty in pricing the last two weeks.
We would expect hog supplies to increase next week. Market participants continue to struggle with the implications of the September Hogs and Pigs report and what the marketing hole that opened up in September tells us for hog supplies for the next three months. Hog prices in the spot market continue to hover near 90 cents per pound but that could be short lived given weaker cutout values, heavy carcass weights and the expected seasonal increase in hog numbers.
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