Pork Commentary: Better but Not Good Enough

CANADA - This week's North American Pork Commentary from Jim Long.
calendar icon 9 February 2010
clock icon 4 minute read

Iowa – Southern Minnesota’s lean hog price averaged $62.30 last week which is at a price that most producers are losing money. Hog prices have gotten better from the dismal lows of the last months, but still there is little financial relief. Unfortunately, the massive equity crater that has been created over the last two and a half years is getting no smaller. The brutal reality of the financial situation is continuing to take producers out of production. Weekly we hear of sow units quitting voluntarily or involuntarily. This carnage continues to cut our production base.

Other Observations

  • In the last month, March corn has gone from $4.25 to $3.50 a bushel – that is a 75 cent a bushel decrease. March Soybean Meal has decreased from $310 a ton to $270 a ton in the last month. Put together in the last thirty days feed costs to produce a market hog has decreased $10.00 per head. It’s going in the right direction.

  • Corn and Soybean prices have not only come under pressure from what the USDA has projected as record domestic production but from ongoing reports from South America where both Argentina and Brazil are expecting to record production. We can only hope that all the bearish grain news pounds the prices lower. In the last month the price of crude oil has dropped from about $84 to $71. We can only hope oil drops further, giving the people who burn corn for ethanol continued challenges.

  • US hog marketing’s have now been down year over year for five consecutive weeks. The current average lean cost of 51 – 52 per cent hogs is 64.71 while a year ago the lean price was 57.47. The real good news is hog marketing’s have been down well over 4 per cent a week but average lean hog carcass weights are averaging about 2 pounds less than last year. Less hogs, less pork tonnage and lighter weights certainly don’t indicate anything but a current hog inventory.

  • The USDA cash early wean and feeder pig report last week indicated prices that have held despite the drop in lean hog futures over the last three weeks. Cash early weans averaged $46.34, 40 pound feeder pigs $67.18. At these prices small pig producers are making money. It is a long way from the $5.00 pigs of mid August.

  • The sow herd is old. We have seen several sow parity reports of Genesus customers. Lots of herds with a high per centage of sows six plus parities. All herds generally drop born alive after six plus parities. This will impact productivity. At some point there will be a massive influx of gilts needed. It’s like the car industry, as car age increases, the pent up demand (need) for new cars increases.

  • There are increasing reports of mould and mycotoxin issues in the US corn crop. There is significant testing available and mould inhibiters. We suspect and speculate that there will still be breeding and growth problems in some production herds. If it only affects 1 per cent of both and it leads to fewer pigs and less pork. Price enhancing.

  • Canada’s National Financial Program to take hog producers out of production has accepted the equivalent of 104,000 sows to stay out of production for three years. We expect the number will exceed 120,000 sows by the time the program is completed. Fewer sows in Canada cuts North America’s production base and supports prices. Canada’s days of the world’s largest pork exporter are over.

Pork Continues to make demand strides

Last week the President of Argentina discussed the Viagra like merits of pork consumption. Now Maple Leaf Foods sponsored a National survey which confirms Canada’s love for bacon. Keep the good news coming!

Further Reading

- Go to our story on Maple Leaf's For the Love of Bacon survey by clicking here.

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