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Jim Long Pork Commentary: U.S. Hog market continues strong

07 November 2017
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

Another week of strong seasonal prices in the United States. 53-54% lean hogs 68¢ lb; a year ago, they were 50¢ lb. That’s almost $40 dollars per head higher! Who would have thought.

A few weeks ago, when we wrote that lean hogs would stay above 55¢ lb this fall, we had no clue how this market would defy all forecasts. Indeed, hog producers are getting profits from $10 to maybe $20 per head.

A reflection of the optimism that has come with higher cash and lean hog futures, is the USDA average cash price for 40-pound feeder pigs. This past week averaging $53.78 US. A year ago, they were averaging $23. It doesn’t take a computer to see the $30 per head difference. On Friday last week the Feeder Pig breakeven calculations on DTN was $62.62 per head. The market always moves to breakeven. Expect further feeder pig price increases in the coming weeks reaching at least $80 per head. Not a tough prediction as last year they went from $23 per head to $77 in March- April

US hog slaughter this past week, was 2,453,000, down 80,000 from a year ago. We see slaughter weights increasing. We suspect some Packers are cutting kills to try to lower hog prices to improve margins. It will be interesting if this will work. With increased daily kill capacity from the new slaughter plants, the challenge for each Packer is the risk of market share loss which could include retail shelf space or export orders being taken by a competitor. It’s a game of chicken (but in hog industry). Packers have got used to gross margins reaching at times over $50 per head. They, like anyone in business, would like to sustain that wonderful return. Currently estimates range from $10 to $25 per head, packer margins, a long way from $50.

We expect as the new packing plants get to full production and hog supply seasonally declines, packer margins will be even lower; some below breakeven.

Take home message – All good things must come to an end –

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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