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CME: Pork Markets Still a Topic of Interest

by 5m Editor
18 August 2009, at 9:24am

US - Following up on Friday's discussion about sow prices reported by USDA, it was pointed out to us that the quoted USDA sow prices reflect the price of sows slaughtered the day prior, reports Steve Meyer and Len Steiner.

Those sows were naturally bought earlier than their slaughter date and, as a result, do not reflect actual sow prices for that specific day. In addition, one should point out that there are two separate USDA reports that cover the sow market. One of them is a mandatory report and the other is a voluntary report. The prices quoted in the Friday issue were from the voluntary report, not the mandatory report. You can see the actual USDA numbers for mandatory sow report and voluntary sow report.

Pork markets remain a topic of interest and it was interesting to see on Friday an announcement by the Canadian government that it was stepping in to support their struggling hog producers. The Canadian hog industry has been in a contraction mode since 2005 but the contraction has accelerated in the last two years following sharply higher feed costs, lower hog prices as well as the implementation of the Country of Origin Labeling Law in the US, which distorted demand for Canadian born feeder pigs.

The most recent Canadian government support program envisions a CAD$75 million fund (~US$68 million), which will provide support to producers that wish to stop or suspend production for at least three years. The program also would create a CAD$17 million fund to support global marketing efforts to promote Canadian pork. Furthermore, and likely just as important, there is a provision that would allow banks to provide “long-term loans with governmentbacked credit.“ This is important since many Canadian hog producers are finding it difficult to secure credit in the current environment.

According to the news release "The Government of Canada will share the loan loss risk. Lending organizations will be required to ensure that the borrower has a credible business plan..." Clearly the Canadian government wants to prevent a complete collapse of this once fast growing industry, a collapse that would have significant social and economic consequences for many farming communities.