Reduced Output, Increased Demand Drive Up Prices

CANADA - H@ms Marketing Services credits a dramatic improvement in live hog prices in April to higher than anticipated herd reductions, particularly in the United States, and increased global demand for pork, writes Bruce Cochrane.
calendar icon 30 April 2010
clock icon 3 minute read

Corresponding with the 1 April release of the USDA hog and pig report, we've seen a significant upsurge in live hog prices.

H@ms general manager Perry Mohr says, while most analysts had been anticipating a 1.1 per cent reduction in the number of pigs going to market in the US compared to one year ago, the USDA report projects a 2.8 per cent reduction.

Perry Mohr-H@ms Marketing Services

That stimulated a significant rally in the lean hog futures.

For instance on 26 March the lean hog futures for July were at about 78.35.

Last week, on the 22 April, those same lean hog futures for July were at 87.60.

That's a difference of 19 dollars per hog US.

On the cash side of things packers in the United States are chasing hogs right now and that's because again the numbers that are coming to slaughter are lower than anticipated and they're also coming in at lower weights.

That factors into the total pork available and this decrease in supply has been met with some pretty good demand figures.

We're seeing demand on the domestic and export markets fairly robust and what that has done is it's resulted in a draw down in cold storage.

Our cold storage today is about 86 percent of a years ago and again that's due to both very very strong domestic and export demand.

Mr Mohr anticipates additional upward potential in the hog market but he is concerned with the strength of the Canadian dollar relative to the US dollar.

He says that is hindering gains on this side of the border and he doesn't expect that to change in the foreseeable future.

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