The March 27 USDA Hogs and Pigs Report showed a big surge in inventory numbers compared to the PEDV-depressed levels a year ago. However, inventories are not that far out of line with March 2013 levels prior to PEDV. But hog prices are lower than in 2013 and much lower than last year.
Key drivers are heavier hog carcass weights, currently running about 215 pounds vs. 207.3 pounds in 2013.
Heavier carcasses are putting about 5.3% more pork on the market. At the same pork exports were down 20% in January, partly due to west coast port labor issues and down 15% in February. They're still down in March and will remain under pressure as long as the dollar stays super strong.
Looking at the numbers. USDA's Hogs and Pigs Report tallied all hogs and pigs on March 1, 2015 at 65.9 million head. This was up 7% from March 1, 2014, but down slightly from Dec. 1, 2014. It was also a shade higher than the average trade guess in advance of the report.
Breeding inventory, at 5.98 million head, was up 2% from last year and up 1% from the previous quarter, but a shade lower than the average trade guess.
Market hog inventory, at 60.0 million head, was up 8% from last year, but down slightly from last quarter. Market hogs came in higher than the trade expected. With most of the higher than expected marketing hog inventory in the heaviest and lightest weight groups.
The December 2014-February 2015 pig crop, at 28.8 million head, was up 9% from 2014 and very close to the average trade guess in advance of the report. Sows farrowing during this period totaled 2.83 million head, up 2% from 2014, but not up as much as the trade expected. The sows farrowed during this quarter represented 48% of the breeding herd. The average pigs saved per litter was a record high 10.17 for the December-February period, compared to 9.53 last year.
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Retail meat prices ease just a bit. Average prices for beef and pork fell in grocery-store advertisements this week, according to a Wall Street Journal retail-meat survey.
The 15-cut average for beef fell to $5.51 a pound from $5.69 last week. It gained versus $4.99 a year earlier, the survey found.
Grocers listed lower prices for some steak cuts, with decreases from a week earlier for strip, rib-eye and round steaks.
The five-cut average for pork prices fell to $3.36 a pound this week, from $3.41 last week. Prices were higher than the $2.66 average a year earlier.
Chicken prices also dipped this week. The two-cut average slipped to $1.96 a pound from $2.03 last week, though it was up from $1.94 a year earlier.
Pork remains pricy compared to hogs. Monthly average live basis cash hogs peaked at $93.60 in July last year. By January live hogs collapsed to $77.40, down more than 38% from their peak.
Monthly average retail pork prices peaked at $4.21 a pound in September last year. The January 2015 average eased to $3.93, down a modest 6.8% from their peak.
Pork producers sense that collapsing hog prices should be attracting a lot more pork customers. But the dip in prices consumers see for pork at the meat case is nowhere in in line with the plunge in hog prices. Ample reasons exist:
1. Retail prices are always sticky downward.
2. The $15 to $16 premiums in summer hog futures over April futures suggest the current low hog prices are only temporary.
3. Retailers like to attract customers with specials, but they do not like to whipsaw customers with base prices.
4. Meat department managers are charged with delivering a certain amount of profit from the department. If they can capture a little extra margin on pork, they do not have to push beef prices quite as high.
That all said, over the long run, farm-to-retail margins widen and then narrow, widen and then narrow again. Retail pork prices will eventually become more in line with hog prices. But it will take a while.