Pork Commentary: October and December 2010 Lean Hog Contract

CANADA - This week's North American Pork Commentary from Jim Long.
calendar icon 27 July 2010
clock icon 4 minute read

Last Friday October lean hog contracts at 77.025 and December at 74.350 closed from what we can determine were life of contract highs. Certainly some producers will look at these levels as good selling opportunities.

Last week 53 – 54 per cent lean hogs were averaging nationally 80.32; a year ago they were averaging 60.76. That is 20 cents higher this year ($40 per head). Cheques are certainly bigger! Everyone needs it.

Last week’s US Hog Marketing’s were 1.961 million down. 68,000 head from the same week a year ago. Less hogs, no H1N1 (swine flu), and better demand is leading to the $40 per head difference.

Other Observations

  • Last week National Direct Cash early weans averaged $42.92 - 40 pound feeder pigs $61.41. Demand is good for small pigs and prices are counter – seasonally strong. What is interesting is reports that we are hearing of reluctance of buyers to sign long term contracts. The reality of the losses in the last three years and the price volatility of both grains and hogs have made long term commitments a nervous proposition.

  • September CBOT corn a bushel dropped to $3.71 a bushel last Friday down 24 cents a bushel in a week. Crops look excellent in most areas. This significant lower year over year pork in storage bodes well for hog prices in the coming weeks. August lean hog futures of 83 cents plus are not an aberration.

  • US retail pork prices hit record highs in June at $3.14 per pound. Consumers are definitely wanting our product this is a great sign of demand. We have producers making money, packers making money, and consumers voting with their dollars to buy our pork all positive.

  • US May Pork Exports were up 22 per cent in May over a year ago. This has helped push US hog prices up year over year $40 per head we have seen in the last three months. When it’s raining enough that lawns don’t need watering at the end of July. Enough moisture for crops is not an issue. Read this week that corn is $2.20 US per bushel in some parts of Brazil. That doesn’t work for corn growers. There is no corn ethanol in Brazil. Cheap feed for livestock and poultry though.

  • The USDA released 1 July Cattle and Calve Inventory last week. The total cattle and calves were 100,800 million – down 1.2 million head from the year before. Cattle numbers continue to decline year upon year. Less cattle creates Red Meat substitution opportunities for pork.

  • US pork in storage at the end of June was 410 million pounds, down 167 million pounds from a year ago and down 36 million pounds from the end of May.

Some points from the National Pork Industry Conference two weeks ago

  • Compared to 1950 the US produces 176 per cent more pork with 44 per cent fewer sows.
  • Compared to 1930 USA produces 333 per cent more corn on 11 per cent more acres.
  • Compared to 1930 69 per cent more wheat on 6 per cent fewer acres.

Obviously technology has pushed yields to extraordinary levels but you can see the obvious benefits of the effort and capital put into corn hybrids compared to lesser efforts in wheat.

Swine productivity continues to accelerate. We see herds reaching 35 pigs per sow per year in the not too distant future. The large structural frames of breeding stock needed to have the material capacity to carry large litters also gives the length and frames to carry large carcass weights. We currently have customers producing over 7,400 pounds of hogs per sow per year. 8,000 pounds will soon be reached.

Food productivity has driven the high standard of living we have today. In 1908 50 per cent of an average American annual income went for food. Now it is 10 per cent of income. Less money on food, more money for cars, housing, clothes, vacations, etc... Agriculture has been the catalyst for the American dream. How many Americans realize that?

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