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Pork Commentary: Strong Prices Continue Despite Onslaught of Hogs

by 5m Editor
26 July 2006, at 10:19am

This weeks North American Pork Commentary from Jim Long.

Last week the US marketed 1.969 million hogs; 101,000 more than the same week last year (+5.4%).

Not only a lot more hogs, but also significantly more pork that has to get through the food chain. The amazing thing is hog prices are stronger now than they were a year ago despite this huge increase in pork production. Last week’s Iowa-Minnesota Friday’s average lean price was $68.78. Last year the same week it was $67.37.

Packer competition from increased shackle space, robust exports and steady domestic demand is supporting hog prices. Many producers will be currently profiting in the $25-$35.00 per head range. This is a tough business and it is good to see producers making real money.

Sow Slaughter

Question: Is their breeding herd expansion if year over year sow slaughter for the last ten weeks is higher than a year ago? Hard to mesh the two together isn’t it? Year to date shows almost 60,000 more than a year ago and last year we were not expanding. Has two plus years of profits encouraged some producers to take the opportunity to exit the sow business? We think so.

The breeding inventory is always moving up and down. The net effect of expansion and exiting. We are of the opinion 1-2% (60-120,000 sows) of the breeding inventory is liquidated annually due to barn obsolescence, urban sprawl, personal reasons, etc.

Cattle on Feed

The USDA (July 1) semi annual cattle on feed report was released last Friday. The total cattle inventory is 1% higher than a year ago. In the big picture, beef supply shouldn’t be significantly higher over the next several months. This should be price supportive for hogs.

Positive – Greatest May to June pork disappearance this decade. The third lowest ending inventory. Pork prices stayed strong in June despite record amounts of pork being pulled out of storage.

Summary

Producers are making good profits. Year to date sow slaughter is significantly greater than a year ago. (+60,000). The US cattle inventory indicates minimal expansion (+1%). Pork in storage including bellies is at a level that is price supportive. Bellies and pork net disappearance from storage in June was at a decade record pace. All positive news. To top it off hogs being pulled forward added 5% more pork into the supply chain the last two weeks, but still lean hog prices are higher than a year ago. Good demand and good for all producers.

Written by Jim Long, Genesus Genetics / Keystone Pig Advancement Inc. - 25th July 2006 - Reproduced courtesy Farms.com

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To find out more about Genesus Genetics,
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5m Editor