ShapeShapeauthorShapechevroncrossShapeShapeShapeGrouphamburgerhomeGroupmagnifyShapeShapeShaperssShape

Pork Commentary: The Most Volatile Time Ever?

by 5m Editor
16 September 2008, at 8:10am

CANADA - This week's North American Pork Commentary from Jim Long.

We wonder if it’s ever been like this? The volatility in the hog and grain markets are almost incomprehensible. After the corn market hardly moves from $2.00 a bushel for a decade, we have this corn up to $5.00, then $7.50, then back to $5.00. Hog cost of productions of 60¢ lb liveweight when we figured it was around 40¢ for ten years. It’s crushing psychologically and financially.

Then you have hog prices moving up and around. We had December Lean Futures at 76.47 on August 8. A month later December is 65.30 – a change of $24.00 per head. What changed? The same number of hogs were coming to market in December on August 8 as now. There are no new reports! There is no rhyme or reason to the hog or grain markets. It’s volatile, but more than that, these dynamics are making it very hard for any long term planning. We are an industry flying by the seat of its pants. Nobody knows what is happening. It’s wild guesses. It’s hang on and hope it works out.

Other Observations

  • U.S. pork exports are being affected by a strengthening U.S. Dollar. In the last couple of months the Euro has weakened 14% to the U.S. Dollar. The Canadian Dollar in the same time frame has lost 8% to the U.S. Dollar. This is making both more competitive in world pork markets. U.S. Pork Exports have been magnified in the last few months by having the cheapest pork in the world with a rising U.S. Dollar, exports will become harder.
  • There has probably been no time in the last twenty years where there have been so few new sow barns under construction in Canada and the USA. When you consider that approximately 7.5 million sows die in the Canada-USA production base, even 35,000 new sow spaces in 2008 would be only a ½ of 1% infrastructure replacement rate. We can add up only 10,000 sow spaces under construction currently. It’s attrition. From what we can garner out of the genetic industry, gilt sales are off 25% to 50% depending on the Genetic company. Sows are being held for more parties. The sow herd is getting older and sow mortality is getting higher. Cash flow, real and expected, is limiting gilt purchases. We expect many herds have fewer breeding animals than a year ago. You have to work to hold inventory numbers. Financial losses take the edge off the zeal to maintain inventory.
  • We were at the Carthage Vet Symposium last week. Tim Loula DVM spoke about the ways to reach 30 pigs per sow per year. We are glad the establishment is now beginning to recognize the achievability of such lofty productions. We have felt because Genesus has had the only two farms in North America to reach 30 pigs in a calendar year that these extraordinary achievements have minimized by other genetic companies (for their own reasons) and what we might characterize as the professional pig establishment. Genetic capacity is the future for our industry as we compete with poultry for consumers meat budget dollars.
  • Lipstick on a pig is terminology in U.S. election. Interesting way for our industry to get free marketing. Not sure it does us any good, but certainly cost less than the one billion dollars into the Other White Meat slogan. Maybe if they added lipstick on a pig. Blah!

Summary

We are worried about the hog price this fall. Last week the U.S. marketed over 2.3 million hogs. We expect the next 10 weeks will exceed this number weekly. Week upon week of too many hogs. It’s not price positive. At current feed prices we expect $40 per head losses as hogs go to 60¢ lean. No one needs this. It’s already been bad enough. The fall could take out the ones teetering. Unfortunately, it’s a Darwinian industry. We have been and still are positive for 2009. The challenge is the will and ability to get there.