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Pork Commentary: Bullish US/Canadian Inventory Report

02 November 2010
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

CANADA - This week's North American Pork Commentary from Jim Long.

We haven’t had much good news the last few weeks in the hog industry with prices under challenge and a spike in feed prices. Last week some welcome news came with the combined USA – Canada Swine Inventory Report. USA – Canada breeding herd at 7.07 million down 2 per cent from a year ago, and market hog inventory at 69.8 million was down 2 per cent from last year. The pig crop was down 2 per cent as well as sows farrowed. The bottom line is 2 per cent less sows, 2 per cent less market hogs, 2 per cent less farrowings, and 2 per cent less pigs born. All in all 2 per cent less everything. This is bullish as we move forward. This summer we had hogs in the mid 80’s. It is hard to believe 2 per cent less won’t result in even stronger prices as we go forward.

Canada Hogs on Farms
Quarterly Report (thousands of head)
YEAR The Downward Trend Continues All Market Hogs
2005 1619 13585
2006 1582 13317
2007 1543 12816
2008 1417 11327
2009 1349 10605
2010 1298 10555

The Canadian Swine Industry continues to contract with breeding herd down 51,000 from last year and 321,000 lower than five years ago (-20 per cent). The Canadian market hog inventory is down year over year 50,000 while its dropped 3 million in the last five years (-24 per cent).

Canada’s hog producers have been hit hard by a higher Canadian dollar, country of origin labeling, and the general financial situation all hog producers have faced over the last five years in North America. The current par dollar Canada has with the US coupled with current hog prices and feed costs will in our opinion lead to a further contraction of Canada’s hog industry. Some producers will come to the conclusion that having hogs is not having fun.

Other Items

  • The USDA cut – outs were 73.68 last Thursday. The National Base price 53 – 54 per cent lean hogs were $65.78 the same day. We have seen a $30.00 per head price drop in the last three weeks. Prices keep declining – where’s the bottom? We believe in the next ten days.

  • Chicken producers are doing their part to limit meat protein production? Egg sets up 10 million a week, chick placements up 10 million (+7 per cent) year over year. Maybe they know something nobody else knows. $5.00 plus corn and expand chicken production? The last time the chicken genius’ tried this the largest company Pilgrim Pride went broke. Chicken prices are 80 cents per pound, last year they were 72 cents. Time will tell how all this plays out but it appears the poultry companies are playing a game of chicken with each other. Probably one of them will crash.

  • Hog slaughter weights have exploded hitting record levels. New crop corn has pushed growth and it’s been extraordinary. The Iowa – Minnesota live weights released last week averaged 275.3 pounds, the week before they were 274 pounds, a year ago 269.9 pounds. Year over year 5.4 pounds heavier, this year these larger carcasses are putting more pork on the market and pushing hog prices lower. Packers have the hammer – lots of hogs, lots of heavy hogs and producers calling them to sell. The old adage ‘who’s calling who’ is reflected in the $30.00 per head price decline in the last three weeks.

  • National Direct Cash Early Weans averaged $37.90 last week and 40 pound feeder pigs $50.71. High feed prices have pushed these prices lower over the last few weeks. The good news for small pig sellers is the space pendulum is going in their favor. The seasonal of small pig supply is for it to begin to contract just as finisher space opens up seasonally with the boost of new crop corn. Therefore fewer pigs available will be being chased by a greater number of finishing spaces.

Summary

The USA – Canada combined inventory 2 per cent less sows, 2 per cent less market hogs, 2 per cent less farrowings, and 2 per cent smaller pig crop. Everything is 2 per cent less. Tough hog markets currently but supply will decline seasonally year over year. Work through the next few weeks and prices will rebound.

Author: Jim Long, President & CEO, Genesus Genetics

To find out more about Genesus Genetics,
please take the time to visit their website at
www.genesus.com.

The opinions expressed in this commentary are entirely those of the author and can not taken to represent the views of ThePigSite.com, its owners or its management.



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