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Pork Commentary: US Hog Market Strengthens

19 February 2014
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

US - The US Hog Market continues to get stronger, writes Jim Long.

  • Market Hogs continue to get stronger with Iowa –S. Minnesota hitting on 88.60¢/lb. average last Friday, up about 10 cents lb. in the last month.
  • Last week June – August lean hog futures reached new contract highs.
  • Cash 40 lb. feeder pigs averaged $104.95 with cash early weans averaging $83.10.

The take home message is cash is moving higher, sooner lean hogs are at contract highs while small pigs are $2.5 higher than the same time a year ago.

PED

The USDA has lowered its forecast for US pork production, citing PED as a major reason.

According to USDA, the US will produce 23.4 billion pounds down from January’s estimate of 23.6 billion pounds.

What we find amazing is that the USA is still estimating 23.4 billion pounds which is 200 million more pounds than were produced in 2013.

We have to admit we can’t figure out how the US will produce more Pork in 2014 with one per cent fewer sows year over year on 1 December (-62,000) and then throw in PED? Indeed we believe the USDA is still over estimating US pork production in 2013. You can’t get more pork with less sows and millions of dead pigs from PED. Some Pork production increase can be made up with heavier weights but we doubt it will be enough to produce more pigs year over year.

Corn - Soybeans

Recently the USDA estimated the U.S. corn acreage plantings at 93.6 million acres in 2014 with a production of 14.26 billion bushels (2011 – 95,365 million acres).

USDA estimates farmers will produce 3.48 billion bushels of soybeans on 78 million acres, (2013 – 76.5 million bushels).

We are no experts on crop planting. Our observation though is that farmers – farm. We expect all available land will get planted because that’s what farmers do. Crop farmers have made money, they bought lots of new equipment and they have to use it. Kind of like Prairies need water unless there is a drought, there will be plentiful corn and soybeans in 2014. Corn in Rondonopolis, Brazil last week was $2.29 US a bushel.

Russia

Russia has banned all Pork from the European Union due to African swine fever found in Lithuania. This is good news for Russia pork producers, with 3 months of Russian pork imports coming from the EU, it is not hard to expect Russian domestic hog prices to jump 13-20 per cent. All margin for Russian producers. Current Russia prices are 72 rubbles a kilogram or $1.03 US liveweight a pound.

Expansion

Probably sow expansion is kind of starting with sows going into existing units that were shut down, won’t be big numbers but it is happening. New barns are mostly figments of the imagination, 6 million sows we expect, one per cent of barn production will go out of business every year or about 60,000 sows. There is no way 60,000 sows of new barns will be built in 2014. Permitting, needed cash, equity levels and labor use, the uncertainty of PED will keep a lid on things despite real good profits coming.

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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