Futures Markets Suggest Higher Hog Prices By Summer

CANADA - The Saskatchewan Pork Development Board reports the current futures markets suggest western Canadian hog prices could start to see a rebound by early 2009, writes Bruce Cochrane.
calendar icon 8 April 2008
clock icon 3 minute read

Since January Canadian hog prices have averaged just over 97 dollars per hog, well below the cost of production, due to the large U.S. supply, the value of the Canadian dollar and higher feed costs.

Sask pork Policy Analyst Mark Ferguson notes feed costs on most farms would be over 100 dollars per hog and the other costs, such as the barn mortgage, employee wages and transportation probably would push the total production cost to the range of 160 dollars per hog.

Mark Ferguson-Saskatchewan Pork Development Board

Most producers would not be covering their costs and would have probably around a 60 dollar deficit.

In a good year a producer is probably only going to have a profit margin of 20 dollars per hog so there's no way any producer could have assembled a war chest or saved up enough to combat the current cost price squeeze.

If the futures market is any indication of what's to come there is going to be an increase in prices and, depending on the exchange rate, this summer we might see 120 per hog.

It's not a terrible price in an historical context.

The long term average price in Saskatchewan is about 140 dollars but, given today's production costs, it's just not enough.

If we look towards the futures contracts in 2009 there's some attractive pricing there for the February and April contract because of the uncertainty in the markets.

Right now producers aren't covering their costs and it's not clear how many hogs are going to be available at that time and that's reflected in the price.

Ferguson concedes, in recent months the cash price has dropped quite a bit lower than what the futures markets had previously predicted so the futures markets are not fully reliable price predictors.

He suggests it depends on what the packers have to pay in a given day to get the hogs.

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