Pork Commentary: Rough Week for Lean Hog Futures

Friday to Friday, February Lean Hog Futures dropped from 62.45 to 55.95, April 68.60 to 66.02. In May, 80.42 to 77.27. There is little market momentum. USDA Pork Cut–outs were 56.26 while Iowa – Minnesota’s lean hog price was 56.76. Packers are bleeding. They have negative margins. Producers are losing about $25.00 to $30.00 per head. Packers are probably minus $10.00 per head. Not much to be positive about. The war of attrition continues.

Is There a Pony in this Pile of Manure? We will never stop looking!!

• Despite what the doomsayers have been predicting, November USA pork exports were up 20 per cent from 2007. January to November year over year has been up 61 per cent, a total of $4.5 billion worth. We expect 2009 USA pork exports to be very close to 2008. People want meat protein everywhere in the world. They will do without other things. It’s maybe simplistic but “People have to and want to eat.”
  
  
• We believe the Cool legislation is manageable for our industry. Let’s hope some underemployed politicians do not make last minute changes that might handicap our industry.
  
  
• The week of 10 January saw 60,000 fewer market hogs and culls sent to the USA from Canada year over year. There were 36,000 fewer small pigs. Combined, 96,000 less pigs from Canada. The sow liquidation in Canada has eliminated most of this supply – 96,000 fewer is price supportive, Big Time. We expect 90,000 fewer a week average going forward.
  
  
• The USA slaughter last week was 2.325 million, down 3.9 per cent from last year’s 2.419 million. Year over year marketings will continue to be significantly lower in the coming weeks and months. In May we expect USA weekly marketings to be down 450,000 head from current levels.
  
  
• Iowa – Minnesota lean price was around 47 cents a year ago. Last week Iowa – Minnesota was 57 cents. A $20.00 per head difference, still not good but an indication what lower supply can do to boost prices.
  
  
• The latest weekly data has year over year USA pork production down 18 million pounds, beef production minus 18 million pounds, chicken minus 54 million, and turkey down 16 million pounds. Aggregate total of 106 million pounds. About 3,000 truck loads less total meat a week. We believe as we go forward the relentless decline of total meat supply week upon week is price supportive beyond comprehension. 1975 was the last year all meat sectors were down. That’s 34 years ago. We hazard a guess few if any of us have any firsthand experience of managing a business from 34 years ago. It’s unchartered waters for all.
  
  
• The Tyson chicken division had stood steadfast in not cutting production in the face of industry cut – backs. Now, Tyson has announced they will cut back chicken production 5 per cent. Less chicken supports all meat prices. The USA chicken breeder inventory is the lowest in over a decade. Consequently, the industry will not be able to ramp up production quickly.
  
  
• We all know Circo virus vaccine has worked. Major mortalities from it have been eliminated. Last year the industry had a production boost from its effectiveness. We do not expect that 2009 productivity will have the big jump that 2008 had. Some analysts have discounted the idea of 6 per cent less hogs in the May – June period, partially due to their belief in productivity gains. We believe Circo – virus vaccine lead to a one time gain in total productivity.

This coming week we will be at the Minnesota Pork Congress. The following week will be at the Iowa Pork Congress. Come visit us at the Genesus Exhibit. We also invite you to the Genesus Reception at the Holiday Inn downtown Wednesday from 5:00 pm to 8:00 pm. Details are available in the Genesus Newsletter below.

Summary

A packer called us last week and took dispute with our belief in 90 cents plus lean hogs coming this year. They are seeing tough margins, lots of supply and have concern for exports. Maybe they are right. We believe that weekly hog marketings will be 1.9 to 1.95 million in May – June. The packer agreed. There will be less chicken, less turkey, and less beef domestically and globally. High feed prices in 2008 have decimated all meat sectors. There are no factual indicators of declining pork exports. We are holding in our belief in 90 cent plus lean hogs.

We Want To Say

We all saw the plane on the Hudson River. The skill of the pilot was extraordinary. The truly special picture to us was the flotilla of boats that came to the rescue of their fellow citizens. As a Canadian, and a foreign observer, it captured for us the essence of America. Problem!! Do something about it. It was individuals who acted. They didn’t wait for instructions. They reacted with decisiveness. There was little time, they had a choice and they made a choice. Women and children first, no one left behind. They saved the passengers. A can do spirit that is the essence of America. Quote: “Let’s roll” – Todd Beamer, a passenger on doomed flight 93 as he and others moved to overcome the hijackers.