Pork Commentary: Hog Market Train Wreck Continues18 November 2015
US - The collapse of the US Cash Hog Market continued last week with 53–54 per cent lean hogs dropping 7¢ (64.19 to 57.66) or about $14 per head, writes Jim Long President – CEO Genesus Inc.
In the last four weeks, the US price has declined from 74¢ to 37¢ per pound or approximately $35 per head. A year ago, US lean hogs were 87¢ per pound or $85 per head higher.
We don’t believe any producer can make a profit at 57¢ lean. It’s not if you are making money or not, it’s how much you are losing. It’s a train wreck with the added problem it seems the price could go lower yet before it recovers. Thanksgiving and the extremely short slaughter week is never kind to hog prices.
What is interesting is that the price is $85 per head lower than a year ago with about 160,000 more market hogs per week or 7 per cent. It truly shows supply and demand and the inelastic relationship pork has to both.
Remind me again why PED was a bad thing? Sure the heck made a lot of producers a lot of money. That cut in supply that PED did was probably worth $80 per head more revenue. Best profits ever!
Reminds us of speech that Larry Pope CEO of Smithfield gave at the National Pork Industry Conference a few years ago. Paraphrasing but basically said that an elimination of PRRS and the subsequent increase in production would lead to so much pork that it would create large financial losses. The PED disease and now its disappearance is a case study of his premise. Eliminate PRRS in North America do we add 5 – 10 million more market hogs immediately? Certainly would be supply and price shock.
What else to say about market. US dollar is high relative to other currencies about 20 per cent higher than a year ago. Helps Canadian producers but hurts US producers. The 20 per cent increase in US means US producers get less in real terms to move product as an export. Farmer arithmetic 60¢ lean now would be 72¢ lean a year ago to a foreign buyer. Takes more foreign money now to buy US product.
This past week was spent with a large Chinese pork organisation. Chinese producers are now making money. They can expect more pork to come to China. Offal is a big mover and as more US–Canada plants get approved for China, more product should go. We understand some refrigerated pork is being trial shipped to China as we do to Japan. If we could get that working, it would open up more possibilities.
The current price spread between the US hog market is currently $175 plus per head compared to China. Lots of room for China buyers to make some money with pork.
Swift - In our opinion, the completion of JBS–Swift’s purchase of Cargill Meats pork division is a positive for our industry. It’s obvious JBS–Swift is committed to the pork industry. As an industry participant to see the confidence JBS–Swift has to pay $1.45 billion to acquire. Cargill’s two processing facilities, swine production, and feed mills we see as heartening. Smart people investing a lot of money in our industry is a real positive for their belief in the long-term future of the US pork industry.
|Author: Jim Long, President & CEO, Genesus Genetics|
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