Pork Commentary: Cash Lean Hog Breaks $1.00!!19 June 2012
US - Last Friday US Iowa – Southern Minnesota lean hogs broke the magical $1.00 lean per pound price averaging $100.09 with highs to $1.03 per pound, writes Jim Long.
A huge surge in cash price of over $30.00 per head in two weeks, we predicted $1.00 would be reached this summer several months ago. We are happy. Producers need the positive cash flow that $1.00 lean hogs bring.
The naysayer chicken little ag economists who just a few weeks ago were predicting that lean hogs would barely crawl into the high 80s or low 90s a pound this summer missed the mark.
Why is it $1.00 lean?
- Last week the US marketed 1.957 million hogs the seasonal low and 20,000 less than the same week a year ago. Fewer hogs always lead to stronger prices.
- US packers are financially strong, pressure to maintain market share, fill export orders, and have pork product for processing. Throw on top of this they don’t like each other. You and up with packers chasing hogs and doing it all for negative margins.
- The latest US Pork Export Data shows that April was up four percent in value over last year. Global pork demand is still strong, when weekly marketing of hogs drop below 400.000 head as they have from annual highs the only way you can ration pork supply is higher prices.
- Global hog markets remain strong with Spain the world’s fourth largest hog producer hitting price levels of an 8 year high; China hog prices 40 per cent higher than the US, and Russia hogs almost double US prices. High prices are a reflection of supply and demand. An indication of China demand is last week’s seizure of 1,800 metric tons of frozen meat by Chinese authorities as it way trying to be smuggled into Shenzhen China. Smugglers of pork – who would of thought? You don’t try to smuggle unless there’s a real reward and demand. Next will we have pork cartels?
- US hog supply could be being tempered by the PRRS breaks this winter. If PRRS was as significant as we and others believe the time is right for supply to be cut. Going forward if the antidotal stories we are hearing are correct that the PRRS vaccine from MJ Bio Logics is working as well as the reports, PRRS breaks going forward might not be as bad – time will tell!
- Hog to corn ratio has been under 15 to 1 for months and months. We don’t believe a ratio below 15 to 1 has ever lead to expansion. How could we expect significantly more hogs then? High feed prices are limiting global pork expansion.
- Competing US meat supply is down. Less US chicken – less US beef cuts total protein availability. Cut hog supply as we have the last couple of weeks and we have a rocketing hog price.
Surging lean hog prices to $1.00 lean. Less US hogs less chicken and less beef. Strong pork exports. Packers chasing hogs leading to hog producer cash flow getting a real boost. Producers need the upside.
|Author: Jim Long, President & CEO, Genesus Genetics|
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