USDA pork cut outs were 89.82 cents per pound last Friday, getting closer once again to 90 cents per pound. With August lean hog futures at almost 87 cents USDA cut outs will probably need to push to 95 cents plus to get lean hogs back to near 90 cents per pound.

Other Observations

• The sow price is very strong 450 – 499 pound sows were $64.34 per pound live weight last Friday, while 500 – 550 pound sows were 66.15. A 550 pound sow will be bringing well over $350 each. (Except in Canada where for some unexplainable reason there is about a $50 per head lower price at all weights). US – Canada marketing’s are running about 9,000 head a week lower than last year when there was large liquidation underway.
  
  
• We aren’t picking up there is much expansion underway. Maybe some herds are increasing internally eg: 2500 sow unit was running at 2200 now is going back to 2500. There are discussions about empty sow units getting fired back up but so far mostly talk with little action. It takes capital and courage. Both dynamics were severely hammered the last three years.
  
  
• Pork bellies last week were trading at $1.33 per pound - a year ago they were 63.20 cents per pound. That is 70 cents per pound higher than a year ago.
  
  
• One of the reasons pork bellies have reached possibly the highest prices in US history is the fact US bellies in inventory 30 June are 54 per cent of a year ago. Total pork stocks are the lowest they have been since September 2005. The low pork stocks will take away leverage from packers over the next few weeks. As the old saying goes ‘The cupboard is bare’ you can’t have producers lose billions of dollars and keep supply from falling.
  
  
• Corn is pushing $4.00 a bushel. Feed price increases are raising the cost of production for hogs. Thank goodness the US corn crop looks as good as it does. $4.00 a bushel corn with maybe the best crop in history? What the heck are we going to do if ever there is a drought?
  
  
• Some increased packer activity in Canada. There are plans to restart the Moose Jaw, Saskatchewan plant, increase capacity at Quality Meats, Mitchell Ontario plant and restart Morrison Meats plant in Cambridge Ontario. Not sure if it is being stimulated by Packer Margins but we would like to think so. A large shareholder in a major packing company recently told us that profitability in their industry was excellent. If true, this will stimulate new capacity.

Summary

Lean hog prices have pushed into the 80’s with pork cut outs almost 90 cents. Low pork in storage totals has diminished Packer – Retail price leverage. With pork exports still quite strong we expect hogs to keep going in the 80’s until October.