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US Hog Market Price Decline

23 December 2014
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

US - The last couple of weeks have not been too shiny for US hog producers. Lean Hog Futures have declined about 10 per cent , corn has gone up 30¢ a bushel, and Cash Lean Hogs have dropped 5¢ to 83.40, writes Jim Long President – CEO Genesus Inc.

The combination of higher feed prices and lower lean hogs has dropped potential hog profits over the next twelve months over $20 per head.

Observations

The cash lean hog price of $83.40 last week compared to 79.90 a year ago.

Last week the US marketed 2.298 million hogs compared to 2.365 million same week last year.

Down, but the weekly decline is not as great as it has been running. The PED breaks had declined by summer when these pigs were born subsequently hog marketings have increased year over year.

The American Association Swine Veterinarian website charts PEDV case reports by week. Last week the reported cases were over 100, the most since last June. It appears to us that last week’s 100 plus cases is similar to the same time a year ago.

PEDV cased exploded from January – May last winter. What will happen this winter? That is the billion-dollar question!

PEDV in Europe. Last week we wrote about the potential outbreak for PEDV in Europe and its potential to be market movers.

Since then a USDA Foreign Agriculture Service specialist based in Kiev, Alexander Tarassevych quoting Veterinarian Dr John Carr, a global PED expert who spent 10 days in Ukraine visiting PEDV outbreak farms.

"PED could spread and ultimately kill 25 million to 35 million pigs over the next 18 months in Europe." We have spoken to Dr Carr and he works with us on a Genesus Nucleus farm in China.

He reiterated his observations on the potential effect of PED sweeping Europe.

Heather Jones a Market Analyst at BB&T Capital Markets "the death of 10 million to 35 million hogs in Europe would effectively take the second largest exporter (about 30 per cent ) of pork out of the market." Ms Jones estimated.

In our opinion, after we observed what happened in the US the last few months, and the concentration of much of Europe Pig Production. It would be not surprising if the PED scourge gets going that it will be a big problem for Europe’s producers. Europe has twice the US’s hog production.

If it does, it will be a market mover of unprecedented amounts. In addition, if PED gets going very strong in the Ukraine, there is a good chance it will reach into Russia’s production base, which would cause even greater effects.

China just released its November monitoring on their Pig Inventory. Sow herd is down 1.2 per cent and Pig Inventory is down 0.9 per cent from October.

Last twelve months Sow Inventory down 12.1 per cent and Pig Inventory down 7.1 per cent . The combination of $10 US a bushel corn and current hog prices is still leading to liquidation. Last month about 500,000 sows out, over the last year between five – six million gone.

The Market Inventory is dropping but its percentage will delay relative to Sow Inventory due to biological time lines. An inventory decline of severn per cent is about 30 – 35 million fewer year over year. It is not if but when the China hog cycle explodes to higher prices and they will need to import pork.

US hogs have been supported by US beef prices. The November feedlot inventory continues to show numbers at near record lows. 10,876 million at 1, December. November placements were the lowest since 1996. The continued lower cattle numbers will support US hog prices through 2015.

How good are we? As of the week of 13 December, USA – Canada had marketed 119.195 million market hogs. The USA – Canada breeding inventory in June 2014 was 7.077 million. We divide 119.195 by 7.077 million and we get 16.84 hogs marketed per breeding animal per year as of 13 December.

Certainly under 18 for the calendar year. PED has affected the number. The combination of USA – Canada numbers picks up the number of pigs cross border. Half of the producers are below the 16.84 average.

1, December Pig Report – We expect expansion. In our opinion, the expansion will be almost irrelevant when the reality of China’s pork needs hit in 2015.

2014 was the best year ever for the profitability of swine producers. Last January we called 2014 The Year of the Pig Farmer – thankfully, it was.

We wish you a Merry Christmas and a Happy New Year!

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.

Top image via Shutterstock



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