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Pork Commentary: USDA Pork Cutouts Break 90 Cents Per Pound

by 5m Editor
28 April 2010, at 7:30am

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

To have high hog prices the packer needs to get paid enough. At the end of last week USDA pork cutouts averaged 90.68 cents per pound. This is up an astonishing 11 cents per pound (79.31) in the past two weeks or about $22.00 per head. If cutouts continue to appreciate as we expect, packers like farmers will not be able to stand prosperity and will bid most of their margin out of hogs as hog supply continues to decline. The US marketed 2.073 million hogs last week. This is 64,000 less than the same week ago. Less supply is here and it is going to get lower yet.

Other Observations

  • USDA
Cold Storage Report for 31 March was released last week.
Pork in storage 31 March 2009 28 February 2010 31 March 2010
1,000 pounds 594,127 515,911 510,482

There was 84 million fewer pounds of pork in storage this year compared to last. Less pork in storage is price supportive. We expect because it is impossible to have no pork in storage because of the structure of our industry. The significant amount of pork is what over 350 million pounds is.

  • The USDA 1 April Cattle on Feed Report was released last Friday. The bottom line: 4 per cent fewer cattle on feed than a year ago. Cash steers were 99 cents per pound last week, a year ago the price was 88 cents with beef cutouts last week around$1.67 per pound up from a year ago which was $1.45 per pound. Some analysts are projecting 8 per cent less cattle to come to market this July.

  • Couple this with cattle market weights now running 24 pounds per head lower than a year ago (1979 lbs vs. 1255 lbs). You have less cattle, less beef, and higher beef prices which will be supportive to pork prices over the next few months.

  • Corn plantings in the USA and Canada have had a phenomenally fast start. The positive correlation between higher yields and early plantings is a fact. Early planting speed we expect will inadvertently lead to more acres put into corn. A bushel of corn is currently a little cheaper than last year but where the big difference in feed rations is corn DDG’s a ton $87.00 versus $120.00 a year ago.

It is reported that in 2009 – 2010 Russia’s production of corn will for the first time exceed the United States. The USDA predicts Russia will produce 61,700 million tons compared to 60,314 million tons for the United States. Russian President Medvedev announced last year his Country’s goal to bring a further 20 million hectares (44 million acres) into production. The Russian goal is to double annual corn production tonnage to 115 – 136 million tons. What is really amazing is the US corn ethanol programme that has pushed global corn price points to $3.50 per bushel from $2.00 has been a huge stimulus for global grain production enhancement as it has brought fallow acres into production. We have seen first hand the massive investment in Russia to increase corn and grain production. Long term land leases of $8 an acre will keep Russian cost of production at globally competitive levels. Where there is corn there will be pigs. Over the next few years we expect Russia’s grain and hog production will increase significantly. Both indirectly stimulated by the US subsidisation of Corn Ethanol Programme.

Genesus Domination

Swine Management Services

Swine Management Services (SMS) of Fremont, Nebraska is the world’s largest swine benchmarking service. Genesus has participated in SMS Benchmarking since 2006 as the Service has grown from 380 farms with 722,417 females to its present 2009 level of 683 farms with 1,215,511 females.

Genesus has grown along with SMS but one thing remains consistent, our domination of the results with, 8 of top 10 farms for all four years and 9 to 15 of the top 20 over the same period.

Genesus believes like many successful, industry leading companies that the only way you improve, get to the top and stay on top is by relentless benchmarking. We invite you to participate and consider our results.

SMS Genesus Performance Data
(1 January 2006 – 31 December 2009)
Year 2006 2007 2008 2009
No. of SMS Farms 380 467 585 683
No. of SMS Females 683,570 839,998 1,106,344 1,188,626
No. of Genesus Farms 30 44 49 51
No. of Genesus Females 24,725 31,407 38,596 42,399
SMS Top 10 per cent SMS 27.20 27.12 27.31 27.62
Genesus Top 10 per cent 29.45 29.97 29.71 30.06
SMS Average All 22.58 22.94 23.30 23.80
Genesus Average All 26.41 26.55 26.78 26.82
SMS Bottom 25 per cent 18.98 18.82 19.72 20.16
Genesus Bottom 25 per cent 24.89 25.17 25.19 25.26
Genesus Herds in Top 10 8 8 8 8
Genesus Herds in Top 20 9 14 15 13

All genetic companies are represented in the SMS database. The facts are indisputable; Genesus is the number one female, with consistent, significant, dominant performance four years running. Isn’t it time you moved up to the Genesus Advantage?