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0.01,5

DC BRANCH

-ro

Federal Reserve Dank of Chicago - -

•

July 3, 1970
PORK PRODUCTION is expected to increase sharply in
the months ahead. Indeed, the increase is greater than had
been anticipated earlier this year. The 1970 spring(DecemberMay) pig crop—the bulk of which will be marketed in the
last six months of this year—is now estimated at 52.6 million
head. This is about 12 percent above the 46.9 million head
farrowed in the same period a year ago. Furthermore, farmers'
intentions as of early June point to a 17 percent increase in
the number of sows farrowing during the fall period (JuneNovember). If these intentions are actually carried out, the
fall pig crop will total 49.2 million head. This combined with
the big spring pig crop would bring the_total_pig crop for the
current year to nearly 102 million head—up 14 percent from
1969, and the largest since 1943.

U. S. PEPE OF Af3P.11;LTEF
LIZ11.11

Number 1072

The current uptrend in hog production started in late
1969 as hog producers increased the number of sows farrowing
compared to year-earlier levels. Relatively high hog prices in
conjunction with a hog-corn ratio (one measure of profitability) well above the long-term average triggered the expansion
which gained momentum in 1970.

Retail pork pricpsTerpt ts),:b9-junder strong downward
pressure as expecteeldrger:rifiark&tings begin to materialize.
Prospective larger Kpli.p.s of competingmeats and less exuberant consumer deffiaralaftWoiiitLiciprice weakness later in
the year. rHog prices, except for the seasonal strength In recent
weeks, have been on the downtrend since the beginning of
1970 and are currently about $1 a hundredweight under last
year's level. Although some further seasonal rise may be expected over the period immediately ahead, prices are almost
certain to continue below the 1969 level. By year-end, prices
are apt to drop below the $20 a hundredweight mark—the first
time since the latter part of 1968.

Production Expansion Underway

Hog Prices Apt to be Under Pressure from Larger Supplies

Spring
Summer
Fall
Winter
farrowings
farrowings
farrowings
farrowings
(Dec.-Feb.) (March-May) (June-Aug.) (Sept.-Nov.)

(percent change from a year earlier)
Illinois
Indiana
Iowa
Wisconsin
Ten Corn
Belt states
United States

+10
+5
+4
+1

+19
+22
+15
+10

+18
+12
+15
+10

+6
+7

+16
+16

+17

Dollars per cwt.
30
Seven markets
28

+18
+12
+10
+15

.0.44/
1
,
4000

26
1970 (weekly)

se

1969 (monthly)

24

+15
+17

Hog marketings in recent weeks have approached 1969
levels as a result of the upturn in farrowings last fall. The number of hogs slaughtered weekly under federal inspection has
averaged about 1 percent above a year ago since mid-June.
Total pork production is up 4 percent over the year-ago level
because of heavier slaughter weights. Since the beginning of
the year, slaughter weights have run about 6 pounds higher per
animal compared to 1969. Hog slaughter, currently at a seasonal low, will begin to increase in coming weeks as pigs farrowed earlier this year reach market weights. Hog slaughter
usually reaches a seasonal high during October or November.
Hog marketings during the remainder of 1970 will continue to outpace those of a year ago, especially in the final
months. If slaughter weights continue high, total pork production will be up even more. The Department of Agriculture's
early June survey showed nearly a tenth more hogs on farms
this year than last. Biggest increases were in the lighter weight
groups reflecting the more recent upsurge in sows farrowing.
Hogs weighing under 120 pounds were up 11 percent, while
those weighing more than 120 pounds were up only 4 percent
from the year before. Nearly all of these animals will be marketed before year-end.

22
-- 20

soul°
1968 (monthly)

18
T11 11111111111111111111111111111111111111111111111111
mar.
may
july
sept.
nov.

The longer term outlook for the hog business appears to
be one of excess supply through the first part of 1971. Farmers' plans can be, and often are, revised, but if current fall farrowing intentions are carried out, the potential supplies-perperson would be the largest since 1959. Prices received by
farmers during that period averaged around $16 per hundredweight. Distant hog futures contracts are currently trading
just under $20 per hundredweight. Corn contracts with similar
delivery dates are around $1.40 a bushel. These prices indicate
a hog-corn price ratio of around 14 for the early part of 1971—
a level which could cause farmers to limit further expansion in
hog production.
Roby L. Sloan
Agricultural Economist

FARM BUSINESS CONDITIONS

•
1970

,

ITEMS

May

April

r
.

1969
May

'
PRICES
Received by farmers, U. S.(1957-59=100)
Paid by farmers, U. S.(1957-59=100)
Parity price ratio (1910-14=100)
Wholesale, all commodities (1957-59=100)
Paid by consumers (1957-59=100)
Wheat, No. 2 red winter, Chicago (dol. per bu.)
Corn, No. 2 yellow, Chicago (dol. per bu.)
Oats, No. 2 white, Chicago (dol. per bu.)
Grain Sorghum, No. 2 yellow, Kansas City (dol. per cwt.) .
Soybeans, No. 1 yellow, Chicago (dol. per bu.)
Hogs, barrows and gilts, Omaha (dol. per cwt.)
Beef steers, choice grade, Chicago (dol. per cwt.)
Milk, wholesale, U. S. (dol. per cwt.)
Butterfat, U.S.(dol. per lb.)
Broilers, live, U. S.(dol. per lb.)
Eggs, U.S.(dol. per doz.)
Milk cows, U. S. (dol. per head)
Farm labor, U. S. (dol. per week without board)
Factory labor, U. S. (dol. earned per week)

117
132
73
116.8
134.6
1.48
1.32
.70
1.96
2.70
23.43
30.53
5.43
.71

.14
.30
330
--

133.67P

116
132
72
116.6
134.0
1.55
1.28
.71
2.00
2.64
24.00
31.56
5.51
.71
.14
.35
327

117
128
75
'
112.8
126.8
1.33
1.32
.68
2.00
2.72
22.93
33.85
5.16
.69
.14
.30
299

76.50
131.80P

-128.61

PRODUCTION
Industrial, physical volume (1957-59=100)
Farm marketings, physical volume (1957-59=100)

169.0P
101

170.4
96

172.5
97

INCOME PAYMENTS
Total personal income, U.S.(annual rate, bil. dol)
Cash farm income, U. 5.1 (annual rate, bil. dol.)

793.5P
50.4

801.3
50.4

740.0
49.0

3.7
74.6

3.5
74.9

3.9
73.4

Demand deposits:
Agricultural banks (1957-59=100)
Nonagricultural banks (1957-59=100)

135.3
129.8

136.2
130.4

133.1
131.4

Time deposits:
Agricultural banks (1957-59=100)
Nonagricultural banks (1957-59=100)

359.1
315.4

356.7
315.1

329.5
319.8

EMPLOYMENT
Agricultural (millions)
Nonagricultural (millions)
FINANCIAL (district member banks)

Based on estimated monthly income.

Preliminary.

Compiled from official sources by the Research Department, Federal Reserve Bank of Chicago.

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