MANHATTAN, Kan. - A "surprisingly large" drop in daily hog slaughter and a tighter spread between wholesale pork and hog values fueled a 50 percent boost in hog prices early this year, said Kansas State University agricultural economist James Mintert.

"Cash prices for barrows and gilts in Iowa-southern Minnesota trade averaged near $40 [per hundredweight] in the first two months of 2000 – 49 percent higher than a year ago," said Mintert, with K-State Research and Extension. At the same time, western Corn Belt prices for 51- to 52-percent lean hog carcasses averaged near $53 per hundredweight (cwt.), an increase of 41 percent.

"Smaller slaughter and a tighter spread between wholesale pork and hog prices should continue to support hog prices in the near term," he said. "As a result, cash barrow and gilt live-weight prices are expected to trade primarily in the low $40s the rest of the winter and early spring before strengthening into the mid- to upper $40s in late spring and early summer."

Mintert said that based on USDA’s December "Hogs and Pigs" report, hog slaughter estimates appear to be on track. As a result, spring slaughter still is likely to fall 3 to 3.5 percent below year-ago levels and summer quarter slaughter will probably dip about 3 percent under last summer’s. The year-to-year difference is likely to be more dramatic this fall, with slaughter possibly falling 4 to 4.5 percent under fall 1999 levels.

"But if grain prices remain near recent levels, weights are expected to be heavier than last year, and, as a result, ensuing pork production declines will be smaller than the slaughter declines," he said.

Prices the rest of the year will depend not only on slaughter supplies but also on pork demand.

"So far in 2000, wholesale pork demand has been quite strong, as evidenced by the large price increases for several pork cuts, especially pork bellies. If demand holds as strong through 2000 as it was in January and February, hog prices the rest of the year will be somewhat higher than forecast following the December [USDA] report," Mintert said.

Strong wholesale demand could boost spring and summer prices into the mid-$40s and upper $40s, respectively, and may keep fall quarter prices above $40, he said.

In turn, the projected sale price needed to cover costs associated with finishing formula-priced early weaned pigs started on feed in February is $40.89 per cwt., said K-State Extension agricultural economist Rodney Jones.

He tabbed returns to labor and management for finished hogs exiting Kansas nursery-to-finishing barns in January at an average $12.53 per head.

"Current breakeven prices to cover all costs are in the mid- to upper $30s (per cwt.) on a live-weight basis, but could inch up to around $40 by late spring," Jones said. "The latest projections suggest average producers will enjoy positive net returns through the summer."

"Average Kansas farrow-to-finish operations continue to enjoy modest profits, with breakevens remaining under $40 per cwt. on a live basis," he added.

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Sow Slaughter Rates Tumble

MANHATTAN, Kan. - Sow slaughter rates fell well below year-ago levels in January and February — which, on the surface, suggests that breeding herd liquidation has ended and that the industry is in the early stages of expansion, said James Mintert, K-State Research and Extension agricultural economist.

But, Mintert said, a sharp shift in trade flow patterns with Canada probably explains some of the sow slaughter reduction, although it still looks like liquidation of the U.S. breeding herd has come to a halt.

Daily sow slaughter averaged 11,000 head during January, down 22 percent from January 1999. Preliminary data put February sow slaughter at an average 16,000 head per day, about 16 percent less than the previous February.

"Recent increases in Canadian packing plant capacity mean that fewer sows have been shipped from Canada to the U.S. for slaughter," Mintert said. "As a result, U.S. sow slaughter data probably overstates the reduction in sow slaughter, although it’s unclear to what extent the shift in U.S.-Canada trade flows have actually affected the sow slaughter data."

Cyclical analysis suggests that an increase in hog slaughter could emerge by mid-2001. That would be reasonably consistent with the apparent current slowdown in sow slaughter, he said.

"Interestingly, recent data from Statistics Canada indicates that the Canadian breeding herd on Jan. 1, 2000 was 3 percent larger than the previous year, indicating herd rebuilding in Canada has already begun," Mintert said.

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