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Pork Commentary: Cash Hogs Rise

28 April 2015
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

GLOBAL - Week to week cash US hogs 53-54 per cent lean, increased from 62.51 to 65 US cents, writes Jim Long President and CEO of Genesus Inc.

That is a step in the right direction. May Lean Hogs were up 3.28 (71.950), higher and we expect relentless price increases week upon week as market numbers decline along with hog weights. We expect summer lean hogs to reach near 2013 levels in the mid to high 90s, We note the strength of the cash early wean market which the USDA estimated was $37.14 last week. Early weans purchased now will be marketed at the end of October to the first part of November. A time frame of seasonally high market numbers. We observe that the price of $37.14 is strong relative to the dire warnings made by the “Chicken Little” Economists relative to barn and packer space.

The point is, there are buyers and they are paying well enough. Obviously cash early wean buyers have space for pigs. It appears the system might be getting full but is not overwhelmed. Cash early weans holding value reflects there is space for pigs.

Corn

The US corn crop appears to be being planted at a normal pace. The US National Cash Corn Index was $3.46 a bushel last Friday. Corn North Dakota, Minnesota was $2.95 a bushel. Corn futures are not gaining any traction with July corn down 17 cents a bushel last week closing at $3.69. We expect if weather allows, the US grain farmer buoyed by record profits and high land values will plant every possible acre into corn, soybeans, wheat, etc. Weather will factor in crop prospects. Farmers do not practice supply – management to support prices. Freedom to farm is alive and well.

Avian Flu

The H5N2 bird flu virus spread further last week with Sonstegard Foods egg layer complex in Iowa of 5.2 million hens found positive then liquidated. Since the initial break, the USDA has found the virus in 13 States and about 7.5 million turkeys and chickens have been eliminated. If the disease continues to spread and especially if it were to get in poultry breeding flocks, the multiple effect to the US poultry production could be devastating.

In the swine industry, PED caused problems last year but the economic effect was somewhat muted compared to the Armageddon – possibility of avian flu. We can only imagine how a poultry producer is sleeping (or not) with this scourge in the country.

Korea

Its good to be a hog producer in Korea. Last week we visited with Korean producers. Market hogs there are bringing about $450 per head. Yes they import all their feed and yes they have a production base with many disease challenges. Still making more than $200 per head when the dust settles isn’t hard to take. South Korea is a big market for Genesus with over 50 per cent of all breeding stock imported coming from Genesus. The Korean market wants Purebred Registered Durocs, Yorkshires, and Landrace and Genesus with the largest privately owned high health purebred registered herd in the world (registration 2014 of 104,000). Through excellent results we have come to dominate this market. When producers are making over $200 per head as they are in Korea, they have the money to choose and buy the best genetics in the world. Mongrel genetics just don’t win the day when people have the capital to push for top results.

Summary

US cash hogs price continues to increase. US pork cut-outs end of last week were $69.94 per pound. Beef cut-outs $256.99. No way this spread won’t continue to narrow. The US has the same number of hogs this year as 2013 according to USDA March 1 Hogs and Pigs Report. We expect similar hog prices this summer with hogs reaching mid '90s.

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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