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Pork Commentary: New Corn, Seasonal Supply Surge

by 5m Editor
27 October 2010, at 9:18am

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

The hog prices in the USA and Canada continues to languish as compared to the high prices of two months ago. Last Friday Iowa – Minnesota averaged $64.28 lean per pound which is probably at least $20.00 per head below breakeven. Last week’s US marketing’s were 2.331 million, up slightly from the same week last year 2.323 million. It’s been a long time since weekly marketing’s have exceeded the previous year.

Other Observations

  • Hogs are growing fast. New crop corn has higher test weights, better protein, and probably less vomitoxin compared to last year’s crop. The explosion in growth is giving the power to the packers. The fast hog growth coupled with the usual seasonal increase in hog supply is leading producers to calling packers to move hogs to get space and keep hog flow’s reasonably current. The old line: “Who’s calling who?” is a very apt description. Producers are calling and in some cases pleading for packers to take their heavy hogs. Packers can help them out, but human nature encourages it being done at a discount. This leads to lower hog prices while USDA cut – outs remain at a level that facilitates strong margins for packers (last Thursday USDA cut – outs 76.76 per pound). The good news despite marketing’s of over 2.3 million pork demand is such that it allows wholesale pork prices to stay strong. As supply declines in the coming months expect a real cash price rebound.

  • The surge in feed prices the last few weeks has certainly put a huge dent in expectations for next summer’s hog supply. Summer lean hog futures hit life of contract highs last Friday. We expect to see further strength in 2011 summer and fall lean hog futures. Continued high feed prices will soon begin to affect 2012 hog supply not only in North America but the rest of the world.

  • Real paradox on corn supply and use. Price is real strong but there is so much corn piled throughout the Midwest it makes you wonder about actual supply – demand equations. What will corn exports be with $5.00 corn? How will corn ethanol producers cope with $5.00 corn and $80.00/barrel oil? Oil companies don’t produce ethanol. We never can figure out why they have any great incentive to sell ethanol in their retail chains. It was the CEO of Exxon who said he saw little future with what he called moonshine!

Think Tank Warns of Global Food Crisis

The Humboldt forum on food and agriculture is warning a food crisis could hit the world in ten years.

  • The Institute claims more than one billion people are malnourished, and 16,000 children die every day due to malnourished related disease.

  • Humboldt believes that sustained higher feed prices will not lead to food riots as in 2007 – 2008 but also to increased migration away from food – insecure regions of the world.

  • Humboldt’s premise is there must be re – investment in agricultural education and infrastructure in both developed and developing countries and farmers in the latter parts of the world must be given access to agricultural technology and bio technology.

Our Thoughts

  • People are starving and malnourished and we are burning our food making corn ethanol? I wouldn’t want to be a policy maker or secretary of agriculture trying to explain this insanity to a starving child. This year 35 – 60 per cent of the US corn crop will go into fuel to power vehicles.

  • We have travelled much of the globe selling Swine Genetics. We have observed the world needs technology. Genetics with better productivity for feed conversion, litter size, growth, carcass yields, and health are a necessity to feed on every growing world population. The spread in productivity between modern genetics and swine genetics of just a few years ago is not only financially challenging but just as importantly is not producing the food required.

  • The need for ever better agriculture technology is real. Research and Development costs for agriculture should not and cannot be financed by the private section. It’s an obligation and need of society to support SR+ED projects of universities, private sector, and government. To push to productivity levels needed for the future. Investments are required.