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Pork Commentary: Hog Markets in Perspective

23 April 2013
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

CANADA & US - Every day, we are asked if the US-Canada hog market has room for a run higher this year, writes Jim Long. We always answer yes. We understand the near anguish of the questioner. The losses of the hog industry have been real. It hasn’t gotten better.

Last week Sterling Marketing of Colorado estimated farrow to finish losses per head to be currently $25.00. Cowboy math 2.7 million market hogs, USA-Canada a week equals $100 million plus in the red a week, it has been, Ugly, Ugly, Ugly.

Some Observations

A year ago this week the US National Base Lean 53-54 per cent was 81.46¢ a lb. This year 80.22¢ a lb. Not much difference. Last year we did reach $1.00 a lb. within 10 weeks from now. Markets move can be volatile and mostly unexpected (note: Corn dropped about $1.00 a bushel in a couple days recently).

Some are predicting (Hello Missouri Ag-Economists) that US Hog Production will increase about 1 per cent this year over last. Actual US hog marketing year to date have been -0.7 per cent lower. We believe that there was sow liquidation not expansion in the last 10 months. US hog marketing in our opinion will remain below year ago levels for the balance of 2013. This will support hog prices.

Hog supply in Canada – year to date (First Quarter) Hog Slaughter in Canada is -1.7 per cent lower year over year (about 100,000 head). Feeder Pig and Early Wean shipments Canada to USA are down 9 per cent (-100,000). Sum it up, Canada hog marketings and small pigs to USA down about 200,000 first three months of 2013. Keep it up it will be close to a million head. Less is not more. Canada’s production decreasing due to the ugly lack of profitability. We are in a Continental hog market fewer pigs in Canada supports Canada-USA prices. We are aware of continued sow liquidation in Canada which will magnify the pig supply decrease.

US Sow slaughter is the first three months of 2013 is 1 per cent higher than a year ago. More sows marketed does not scream EXPANSION to us.

Dr Steve Meyers last week wrote that US Wholesale pork Prices are at very low levels historically relative to Choice Grade Beef and Chicken. This in our opinion will be an incentive for retailers to feature pork which will then stimulate demand and enhance hog prices. We all know the seasonal supply of pork will drop significantly over the next few weeks.

What is seasonable supply difference? In 2012 second quarter April-June the US marketed 26.659 million head or 2.051 million a week. The last quarter of 2012 (Oct-Dec) the US marketed 30.426 million head or 2.34 million head per week. That is a seasonal difference of about 300,000 (almost 15 per cent ) head per week. Big supply change – big price difference. This year April – June we expect a minimum 3000,000 head difference per week compare to fourth quarter 2012.

Corn Crop Planting is being delayed due to cold and rain. So much for droughts as areas of the Mississippi River could flood. We find it interesting that despite what was a disastrous drought last year and Corn-Soybean crops significantly down. Recent Cash Corn bushel Omaha this year $6.81 last year. $6.47. Cash Soybean bushel Southern Iowa $14.61 last year $14.46. A year ago at this time a record crop was dreamed of, we had a disastrous crop year instead, but prices year over year almost the same. Question what would a big crop do to corn and soybean prices? Obviously corn-soybean demand has been damaged, how low will prices have to go to stimulate demand? Last week Rondonopolis, Brazil Corn a bushel $2.86 US soybean bushel $10.44 USD (other Brazil prices higher) Supply – Demand = Price

We have written a few times that the fortunes of the hog industry profitability is greatly tied to our feed costs. Indeed the hog price we are getting now is quite good relative to past years.

Pork buyers whether Retailers, Food service or export have paid significantly more for pork the last two years. Our Farmer Arithmetic tells us its $40/head more than the average of the previous nine years. The positive is the hog price and pork price went up and all the pork we produced was consumed at a significantly higher price which does reflect real positive pork demand.The price of pork in the short term has nothing to do with where feed costs are. As an industry we should be thankful and positive that hog and pork price have shown real price power. This has not turned into profit but if feed prices decline the hog price is at a level that will result in real profits. Consumers vote with their money and they have proven the last two years they will pay more for Pork.

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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