Cash Lean Hogs Have Big Decline28 October 2014
US & CANADA - Strong cattle prices should support lean hog prices in the near future, writes Jim Long. We see how sow herd expansion in the US. Wildcard is PED but expect more hogs by next fall either way. The old adage 'cheap feed leads to cheap hogs' no doubt has changed.
Over the last week, cash lean hogs declined 7.5¢/lb. or about $16.00 per head. ($107.42 to $100.02). Increased marketing numbers and continued heavy market hog weights have increased pork supply.
This past week there were 2,141,000 market hogs down from last year’s 2,260,000. We do not expect much bump to prices anytime soon as pork cutouts are at $98.25, which means the packers have little incentive to bid higher and with negative margins, we expect they will try hard to push cash hogs lower.
The corn harvest is in full swing. The pressure on storage in some areas is pushing basis lower and this has resulted in cash corn averaging in $3.17 last Thursday, near the lowest in five years. This has resulted in feed budgets for farrow to finish market hogs approaching $95 per head and $70 for finishing only.
About $40 a head cheaper ($135) farrow to finish from when feed was at its high. The swine industry is making real money. The equity hole is being refilled. Question now is how long will it take for us to overproduce and kill the golden goose! It’s now when but how soon?
Cattle set record prices this past week. Beef cutouts are strong over double than pork. (Beef $2.47/lb., Pork 98.25¢/lb.). The spread between the two red meat prices should be price supportive for hogs. As a consumer you can get significantly more pork for your money than for beef.
Cattle or feed numbers for 1 October released last Friday were one per cent lower than a year ago. Lower cattle numbers and the subsequent higher beef prices will continue as a price support for hogs.
We are in the Swine Genetic Business. It’s our business to search out new customers. We observe significant efforts underway to expand the US sow herd. Older empty barns are being retrofitted and being refilled. New sow barns are being contemplated. We are refilling existing empty barns now. The new sow barns have started but have not happened to a great extent yet.
The reality is cents on the dollar older units can be up and going faster. New sow barns take significant capital and the time to get it done is longer.
The wildcard in our mind is how many new sow barns will be built in 2015. Depends still on what capital can get rounded up and how profit potentials look going forward. All factors before the shovel hits the ground.
We see little if any new sow barns in Canada. If 20,000 new sow places were built in 2015 it would be maximum. There seems to be little appetite for expansion in Canada at this time. Financial losses over the last five years has made the industry conservative in investment terms.
Mark Greenwood known throughout the Swine Industry from his many speeches and former job as vice president of Ag-Star (Co-op) Bank has joined the Maschhoffs LLC, the largest independent pork producer in the US as president.
The move to hire Mark Greenwood fits the model of the Maschhoffs. Aggressive and relentless! The have built a large multi-enterprise empire anchored by their swine production. We expect the hiring of Mr Greenwood means Maschhoffs will continue to grow. Entrepreneurial spirit is alive and well in Carlyle, Illinois the home of the Maschhoffs. We congratulate Mark on his new appointment.
|Author: Jim Long, President & CEO, Genesus Genetics|
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