Pork Commentary: Surge in Small Pig Prices12 January 2016
US - Last week US cash early weans averaged $57.54 and 40 pound feeder pigs were up to $64.52. A jump of almost $20 per head in the last few weeks and up $7.00 from a week ago. We believe cash small pigs are truly a barometer of supply and demand.
The buyers are in no way paying more than they have to. With market hogs bringing just over $100 per head, it is remarkable that early wean pigs are about $60 per head.
We believe the jump in small pig prices reflect USDA’s December 1 inventory that indicated 1 per cent fewer pigs under 50 pounds. The Chicken Little economists that worry about packer capacity have a disconnect from reality. Small pig prices are being chased higher by barn spaces that are empty. The pigs are not going into fields! How the heck will packers run out of space when the finishers are not full? No way today there is more finisher space in the US compared to the ability of packers to handle hogs. Small pig prices are truly a barometer of supply and demand. We expect an upside to summer lean future prices.
Last year at this time the US lean hog price was 77.37¢ per pound; while hog marketings were at 2.148 million per week.
2016 June Lean Hog Futures are now 77¢ per pound. The same price as it was last January with 2.148 million a week going to market. Last June the average lean hog price was 77¢ per pound.
There are a lot of 77¢ isn’t there? Our contention is that the lower US inventory we saw on December 1st of under 50 pound will help push June hogs higher.
The other factor we see in pushing prices higher is current pork demand as reflected in current packer margins. With lean hogs averaging 52¢ and USDA carcass cut out equating to 71¢ per pound there is a $40 per pound per head gross margin for packers. A very good return. Its great packers are making money because it gives them the resources to up hog prices quickly as the hog supply drops. Also retailers, exporters, food services, etc are paying the 71¢ range and all pork is moving despite the large hog marketings over the last several weeks. As hog supply declines hog price will rebound quickly.
Small pig prices going up $7.00 per head in one week is truly an indication of strong demand for lower supply.
This week we will be at the Banff Pork Seminar and we invite you to the Official Genesus Reception Tuesday night at the Banff Springs Hotel.
The following week we will be at the Minnesota Pork Congress and the week after that, the Iowa Pork Congress. We will report our observations.
|Author: Jim Long, President & CEO, Genesus Genetics|
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