Iowa – Minnesota lean hog price last Friday averaged 82.42 ¢ lean per pound. This is up from the previous week’s $79.91 ¢. A year ago 51–52 per cent lean hogs were 59.58 ¢. We are now $40 per head more than a year ago. Last week the highest net lots of hogs (including premiums) reached $91.46. Did someone say 90 cent hogs? Last week the US marketed 2.028 million head. It’s just a matter of time before we go below 2 million head a week. Hog supply is going to continue to decline. It is amazing that in April lean hogs are in the $80’s, a tremendous reflection of demand relative to supply. Last August we saw 90 cent hogs coming; now we won’t be surprised if some hogs are $1.00 per pound before the summer is over.

Other Observations

• Last week Stats Canada released Canada’s Swine Inventory as of 1 April.
• Canada’s breeding herd has gone down from 1.570 million on 1 April 2007 to 1.303 million on 1 April 2010. That is a decline of 267,000 or 17 per cent. The market inventory in the same time period went from 14.729 million to 11.635 million. That is a decline of about 3.1 million head.
• The devastating financial losses the Canadian industry has had over the last few years has in our opinion permanently downsized the production capacity of Canada. We don’t expect to see any real growth of production for many years.

Lest we forget:

A reader sent us a copy of the lean hog predictions that were given by Paragon Economics Inc (Meyer) at the Minnesota Pork Congress in January.

We are in Quarter 2. The economist experts collectively predicted a market in the 60s. They were not even close! For quarter 3 2010 the wizards were calling for high 60s. Currently, lean hog futures are about 86 cents. The sad part is there were producers who were pressured by their lenders to hedge based on these wrong predictions. They will have got margin calls and had lost opportunities. We hear of too many stories of producers who hedged or sold ahead at prices $30 – 40 per head lower than today. They are breaking even when they could have been backfilling the huge equity hole created in the last three years.

Observation:

Beware of continual Hedge Suggestions by economists sponsored and paid for by Chicago Mercantile Exchange (CME) The CME makes money on trades and suckers. My late friend Doug Maus called the CME Las Vegas with no rules.

Summary

Lean hog prices and lean hog futures continue to show strength. Hog marketing’s will decline with Canada’s hog numbers continuing to fall. It is good to see profits. The pain of the last three years needs to be relieved. Thankfully with almost 70 million hogs in USA-Canada inventory gain of over $2.5 billion. That will help backfill the equity hole.