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Pork Commentary: Cash Lean Hog Rally Soon

by 5m Editor
2 June 2010, at 1:20pm

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

There appears to have been a dip in the cash lean hog market. After hitting our predicted target price of 90 cents, lean hogs have rolled down into the 70’s. We believe hogs in the 70’s will be short lived. The USDA pork cut outs were about 88 cents per pound last week and a spread over 5 cents will not be sustainable over the next three months as low weekly hog numbers will have packers chasing hogs like no tomorrow. US market numbers last week were 1.924 million (the lowest full week marketing’s). That’s 380,000 head per day. US slaughter capacity is over 420,000 per day. Packers had the hammer last week with the Memorial Day holiday in play. Less slaughter days are never friendly to farmers. We don’t want to be cavalier but packers won’t be able to help themselves over the coming weeks. Excess daily slaughter capacity will have them pounding each other to see who can work for next to nothing. Lean hog prices will rebound quickly. We expect the prices to be back to the mid 80’s in a hurry, this is supported by the recent hot weather which will be slowing growth rate and cutting pork tonnage.

A year ago lean hogs were in the high 50’s and were being pummeled by the H1N1 paranoia (swine flu). Currently cash flow is give or take $50 per head better than a year ago. We are all feeling the difference and we need it.

Shrimp

A year ago the 24 hour news channels were inundated with H1N1 (swine flu). Now it’s the oil spill in the Gulf. A couple of observations: Shrimp fishermen who invest in nothing but their boats expect compensation for the oil spill because they are innocent bystanders. Why do shrimp men deserve compensation anymore than the swine industry does for swine flu? The swine industry was innocent bystanders. One other point we actually farm something, we invest in buildings, and livestock – we are farmers. Shrimp men expect the sea to provide their harvest. Buy a boat, throw out a net, and then go back to the dock. The second observation: We have played defense as an industry on the environment. Livestock is a necessity (meat protein) for our society as much or more than oil. We hazard to guess all the manure in the world couldn’t cause the environmental damage of this disaster. The swine industry should be proud of our green record as we life cycle manure into crops and replace the use of petroleum produced fertilizers.

Maple Leaf Foods

Over the last ten days Maple Leaf Foods – Canada’s largest food company announced that their Burlington Ontario plant would only slaughter 20,000 per head per day (down from 42,000 per day) and they were actively attempting to sell the plant. This is collateral damage of the huge decline of hogs produced in Canada and Ontario. The Ontario region used to market 110,000 plus per week, now there’s barely 70,000. You can’t kill what’s not there. Time will tell if a buyer appears for the plant but the challenge of hogs to slaughter is a huge hurdle.

On the Road Again

At writing, we are on an airplane bound for Prague in the Czech Republic. We are there for a couple of days on business then we return home. We are looking forward to the World Pork Expo in Des Moines next week and the chance to see friends and meet new people. We expect the people who show up at the expo will have a bigger smile than a year ago. If you can get to the expo you should. You probably have a lot invested in the swine industry. Getting out and being exposed to the different facets of our industry is smart business. You can find us at the Genesus tent.

Producers Testimonials

Suncrest

“We have had 5 consecutive years of being in the top three with our grades at Maple Leaf Foods using the Genesus genetics. The Genesus stock provides us with a very consistent animal, which in turn gives us consistent grading. The Genesus pig is a structurally sturdy animal, resulting in a low mortality in finisher barn as well as giving our sows longevity with a less than 4 per cent mortality rate.

Since changing over to Genesus we have seen a steady increase in production year over year. We have never looked back!”

Bob Kleinsasser

Suncrest

SUNCREST – PERFORMANCE MONITOR SUMMARY
Year 05 06 07 08 09
Average pigs born per litter 13.24 13.67 13.85 14.20 14.52
Average pigs born alive per litter 12.31 12.70 12.74 12.95 13.20
Litters/mated female per year 2.55 2.51 2.50 2.52 2.53
Pigs weaned per sow 11.10 11.40 11.20 11.30 11.50
Pigs weaned/mated female/year 28.30 28.58 27.99 28.44 29.05
*12 month calendar year data