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1999 U.S. hog prices, basis nearby Chicago futures, tripled in the first half of 1999 to about $60.00 per hundredweight from the late 1998 near historic low of $20.00/cwt. An early summer break carried prices down to about $40.00/cwt. which was reversed when Hurricane Floyd ripped through North Carolina, the country’s second largest hog producing state, leaving in its wake substantial damage to that state’s hog industry. Towards late 1999, nearby futures were again trading in the mid $50.00/cwt. area. Due to the hurricane damage it is possible, at least in states prone to severe weather, that the industry’s push into concentrated corporate based finishing and marketing operations may be reviewed, if for no other reason than the environmental concerns that the storm triggered. The world’s hog inventory in early 1999 of 734 million head compares with 723 million in 1998. World pork consumption set a new high in 1999 at 76.8 million metric tonnes vs. 75.3 million in 1998, but on a per capita basis the 1999 estimate of 18.6 kilograms per person trails the 1995 record of 19.4 kg. China is the world’s largest hog producer with more than half the total with the U.S. a distant second. China’s 1999 inventory of 395 million head compares with 389 million in 1998. In the U.S., the 1999 total of 62.2 million head was unchanged from 1998. Germany’s inventory, the largest in the European Union, of 25.7 million head compares with 24.8 million in 1998. The protracted slide in Russia’s and the Ukraine’s inventory persisted into 1999, as their combined total of 26.4 million head compares with 26.6 million in 1998 and over 50 million head as recently as 1992. The September 1, 1999 U.S. inventory of 60.7 million head compares with 63.5 million a year earlier. Of the total, 6.3 million head were kept for breeding vs. 6.9 million in 1998, with the balance to be marketed. The decrease in the 1999 inventory was expected given the depressed 1998 hog prices. Farrowing intentions during the closing months of 1999 and into the first quarter of 2000 were forecast at 3 percent below the year earlier periods. Although the U.S. hog inventory is only about 8 percent of the world total, slaughter runs about 10 percent and pork production somewhat higher. U.S. per capita pork usage in 1999 of 53.5 pounds compares with 52.6 pounds in 1998 and a forecast of 51.6 pounds in 2000. More than half the inventory share of U.S. hog marketings now come from contract hog operations. In a contractual agreement, the contractor provides the hogs, feed, medication and supplies, while the contractee provides the housing, utilities and labor. Most hog production still occurs in Corn Belt states with Iowa the leading producing state. Southern states have seen dramatic growth in contractual operations in recent years. Still, most U.S. producers continue to raise hogs in farrow-to-finish operations. As of September 1, 1999, the total number of hogs under contract, owned by operations with over 5,000 head total inventory but raised by contractees, accounted for 31 percent of the total U.S. inventory. Commercial U.S. hog slaughter in the January-October 1999 period of 83.8 million head compares with 82.8 million in the like 1998 period, with an average dressed weight of about 190 pounds in both years. Pork production in 1999 was estimated at 19.2 billion pounds vs. 19.0 billion in 1998. Based upon fall 1999 hog inventory and breeding intentions, pork production in 2000 is forecast at 18.6 billion pounds. The U.S. is among the world’s largest pork exporters moving 606,000 metric tonnes in 1999 vs. 557,000 in 1998, and the world total of 2.8 million tonnes in both years. Japan, Russia, Canada and Mexico are generally the largest importers of U.S. pork. The U.S. imports pork products, mostly from Canada and Denmark with 318,000 tonnes in both 1998 and 1999. The U.S. imports live hogs from Canada. Midwest wholesale barrow and gilt hog prices during 1999 averaged about $32.42 per cwt. vs. $34.72 in 1998 and forecasts of $34.00 to $37.00 in 2000. Futures Markets Lean hog futures and options are traded on the Chicago Mercantile Exchange (CME) where futures settle against the CME Lean Hog Index(TM). Their proprietary Index tracks the value of lean pork at select U.S. packing plants. Live hog futures are traded on the Mid-America Commodity Exchange (MidAm) and the Budapest Commodity Exchange.

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Excerpted from the CRB Commodity Yearbook