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Pork Commentary: US Weekly Marketings Drop

by 5m Editor
11 May 2010, at 5:36am

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

US weekly hog marketing’s dropped below the magical benchmark 2 million head last week. Last Friday, lean hog prices 51 – 52 per cent lean averaging nationally 87.43. We don’t expect many producers are holding back ready to market hogs. A year ago 51 – 52 per cent lean hogs were 54.73. We are over $65 a hog better than a year ago. That is a big difference – about $130 million plus a week for the industry. We are all getting smarter and better business like as the market goes up maybe even better looking. A little fewer hogs, better demand domestically and globally and abracadabra higher prices. Unfortunately, the $6 billion industry wide hole that has to be backfilled will take more than 2 weeks of $40 per head profits. A year ago we were in the third week of H1N1 (unfortunately dubbed swine flu). Our market was reeling from fear, paranoia, and a sudden drop in demand. Unfortunately it is a reminder we are one disease or perceived disease from financial calamity.

Other Observations

  • Weekly belly movement out of storage is quite aggressive and a reflection of strong demand. Last week out of storage 2695, last year in storage was plus 955 – that is a swing of 3500. Inventory this year is 26,359, last year inventory was 51,152. When pork gets lower in storage the only solution to ration supply is continually strong prices.

  • Chicken is a major competitor of pork for the consumer’s protein dollar. Last week chick and egg sets were up 2 per cent from a year ago. More but not overly aggressive, while hogs are up from 55 cents to 87 cents per pound lean year over year. The composite 12 city broiler price is only up 2 cents per pound year over year – 80.38LY – 82.10TY. Last week the formerly bankrupt and now re – organized Pilgrim Pride announced the opening of three of their shuttered chicken plants. Sanderson Farms, another major player is building a new chicken complex in North Carolina. After Pilgrim Pride plants re – opening announcement the stocks of Pilgrim Pride, Sanderson Farms, and Tyson (the major US chicken producers) all took a significant hit. It appears the stock market is not convinced chicken demand will meet potential supply. Stock market value punishment could restrict chicken expansion.

  • Last week the USDA reported cash early weans pigs averaged $52.59 while 40 pound feeder pigs averaged $79.33. These are both strong prices for pigs to be marketed in the fall. Once again a reflection of lack of hog supply and demand confidence. The 250,000 sows USA – Canada that were liquidated since last spring are cutting supply. There are more empty finishing spaces chasing fewer pigs. The Ag data DTN livestock margin last Friday calculated that you can pay $65.18 for a 45 pound feeder pig. The cash price of $79.33 is significantly higher. Once again a strong reflection of real demand.

  • European Union prices are strong. The European Union has about 14 million sows or about double North America’s production. Some European markets are 1.45 Euros per kg or approximately 88 cents US lean per pound. Higher prices in Europe will be supportive to USA – Canada exports in importing pork markets.

  • This coming week we are travelling to Brazil. We are speaking at a Major Brazilian Swine Conference at Florianopolis. We will then be visiting some major production and processing groups. We will report our observations next week.

We have heard from some producers that they are worried prices will get too high to fast and rapidly initiate expansion. In our opinion, prices will be what they will be. Just as we had as a production group – no control over lean hogs in the 40’s last year.

Finally

We had a nice email last week from a reader named David. It made us feel good.

‘After stumbling across your commentary a few years back, I realised that it was more than the “run of the mill“, mindless, statistical, propaganda based wild guesses. After two helpings, I became a devoted reader for the following reasons:

You probably know the industry better than it knows itself, your logic is sound, you add passion to the role that you play as a beacon to show survivors to hang in there when the whole damn world says all is lost. You’ve been right a hell of a lot more times than wrong. You provide blunt, realistic, accurate, and captivating industry update in an overview format that in just a few paragraphs which is what I need. Nobody wants to read ten pages of crap that can be summed up in one or two lines. And above all, you are the only supplier to the hog producer’s that I know, that stands up and fights publically against Government (Saskatchewan), brain dead politicians, complete clueless Economists, International Organizations (WHO), and the list goes on.

On behalf of all hog producers in this country, I would like to give you a big Thanks for providing a positive perspective when things were pretty grim. Keep it up!!’