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Pork Commentary: US Hog Prices on Relentless March

by 5m Editor
21 April 2010, at 6:51am

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

The US hog market continues to push higher. Last Friday the Iowa-Minnesota lean hog price was $81.80; the highest price since August 2008. On Friday lean hog futures hit life of contract highs (June 86.15). Last weeks’ hog marketings were about 100,000 less than a year ago (2,032 million). The bottom line – less hogs are leading to stronger prices.

Other Observations

  • US pork exports in February were up 2 per cent from a year ago. 25 per cent of US pork production is being exported. As supply of pork declines in the coming months the price pull from continued strong export demand will support prices.

  • Cash early weans at almost $50 when they will be October market hogs is a reflection of extraordinary demand and lack of supply.

  • We are now marketing hogs from sows bred last July. Last July there were many “experts” saying we needed to liquidate 500,000 more sows. We disagreed at the time saying we had liquidated enough to have profitable markets. We have 80¢ lean hogs now; $20 per head profits. We had indeed last July liquidated enough sows to be profitable. The “experts” were wrong. Since then a further 200,000 sows are gone. Overkill for sure, but it will lead to record profits for the survivors. There will be some $50 per head profits this summer.

  • Last July at the Lake of the Ozark conference speaker after speaker talked incessantly on the need to cut sow production. None talked about pork demand – just supply. It was a short sighted sheep mentality where all the speakers must have been drinking the same Kool Aid. We were in the midst of H1N1 (unfortunately termed swine flu). Of course, demand was being hammered both domestically and globally. It was tragic they the speakers did not see the demand recovery while the constant drum-beating of the sky is falling pushed good people out of the business as many banks got caught up in the no hope mind set. Well demand has improved not just lower supply. Abracadabra – profits!

  • Last week we wrote about focusing our industry marketing efforts on producing meat that consumers want – texture, taste, color, firmness, water holding, etc. To add to this, last week we were talking to one of the leading meat packers. He was quite concerned by what they see in deterioration of meat quality from large use of DDG’s. Softer fat and lighter meat color; both the wrong way for meat quality. He was quite concerned how this could affect short and long term pork demand. Unfortunately, as a broke industry we need to use DDG’s to cut costs. Unfortunately, we are hurting our quality. Not a good long term brand value builder. Like using Pietrain boars or their crosses with their inferior meat characteristics, and then we wonder why per capita consumption of pork is not increasing. Higher real pork demand is an obvious profit enhancer for all of us.

  • Last week we had some visitors from Colombia. Market hogs there are $1.05 US lb live weight. Things are good, but like all producers they are searching for technology that will keep them long term successful. Colombia is a country of 45 million people. The one thing we repeatedly see with our travels and visits from people are the overall similarities and desires. There are good people everywhere.

Happy day for Genesus and our customers! Swine Management Services (the world’s largest swine benchmarking system) of Fremont Nebraska have compiled the 2009 calendar year results of farms totaling 1,215,511 females. Genesus customers, as in previous years dominate the results. Top herd Camrose had 31.55 pigs weaned/mated females /year. Genesus has 8 of the top 10 herds on the SMS system. All genetic companies are represented in the 1,215,511 female data base. We congratulate our customers, our geneticists, and indeed, all of those involved. It takes a team to build the number one female in the world.

Summary

82¢ cash lean hogs with supply declining. Last August when June 2010 lean hogs were 64¢ we saw a scenario for 90¢ lean hogs. We were called crazy. Well, we still see a scenario for 90¢ lean hogs. Surprise! The real liquidation and lack of gilt entries over the last 2 years has lead to a market hog inventory 4 million less than two years ago when we had hogs in the mid 80’s. The lack of pork supply and domestic and global demand will push hogs to 90¢. Our industry needs the cash. We have had enough losses. The anguish and agony of the last 2.5 years is now over. The equity hole will be replenished.

Again - Genesus Dominates

Swine Management Services

Swine Management Services (SMS) of Fremont, Nebraska is the world’s largest swine benchmarking service. SMS 2009 data was benchmarked on 683 farms with 1,215,511 females.

Genesus once again dominated results, 8 of top 10 farms were Genesus. 11 of the top 15 were Genesus.

2009 – 52 week Summary - 1,215,511 females –
Pigs weaned/mated female/year
SMS GENESUS
No. of Farms 683 51
Average Top 10% 27.62 30.06
Average All 23.80 26.82
Average Bottom 25% 20.16 25.26


SMS Total 585 Farms – Genesus 8 of top 10 farms
SMS 52 weeks - Calendar Year
RANKING FARM P/S/Y
GENESUS SMS
1 1 CAMROSE 31.55
2 3 RIVERVIEW 30.10
3 4 WOODLAND 30.10
4 5 EVERGREEN 29.84
5 6 FAIRHAVEN 29.67
6 7 HURON 29.54
7 8 MILLTOWN 29.35
8 9 WIKNER 29.31