Pork Commentary: US Hogs and Pigs Report

by 5m Editor
28 June 2011, at 10:41am

US - In this week's Pork Commentary, Jim Long writes about the latest Hogs and Pigs report released by the USDA on 24 June.

US lean hogs reached over $1.00 lean last week. Some individual net lots exceeded $1.10 lean per pound. No matter how you figure it the average market hog is bringing over $200 per head. These are record prices. Since the World Pork Expo market hogs have jumped 15 cents a pound and corn has dropped over $1.00 a bushel. The cash price margin swing over $30.00 per head. This is an improvement we all need!

  • We wrote last week that we believe early weans and feeder pigs had hit the seasonal price floor. This week they were steady to $2.00 per head higher. Feeder pig brokers also told us this past week they believe the seasonal cash price floor had been hit.

  • July corn June 10 reached $7.99 a bushel; last week it closed at $6.70 a bushel. This is still too high but $1.30 lower in 2 weeks. The difference is $10 per head in cost of production. This has done wonders for psychology. When corn was $7.99 the idea was for it to go to $10.00, a terrible crisis for the swine industry. The $1.30 a bushel drop to $6.70 clearly shows that there is a down not just up to the corn market. It just needs to keep going down.

  • We believe that the cash hog market is going to remain strong in the $1.00 plus range over the coming weeks. Pork exports sales should be extra strong. China, Korea, Japan, Russia, Viet Nam, etc… all have cash hogs over $1.50 lean per pound. At that price it means supply is low and demand is high enough to sustain their market prices. There will be pull of North American pork to these markets.

We often hear the fable that US consumers will have price resistance with pork over $1.00 lean. Maybe it’s true but consider this: 2 per cent of the Chinese make over $15,000 US per year. Lean hog prices are over $1.50 lean a pound in China. It is not hard to figure US vs. China which consumer has more buying power. The US consumer also doesn’t want to buy $4.00 a gallon gasoline – but they do. It’s part of lifestyle just like eating meat is.

June Quarterly Hogs and Pigs Report

0 2010 2011 2011 as % of 2010
Kept for Breeding 5788 5760 100
Market 57808 58021 100
Sows Farrowing (March – May) 2929 2877 98
Pig Crop (March – May) 28730 28851 100
Pigs per Litter (March – May) 9.81 10.03 102

Treading water = record high hog prices would normally cause expansion, but real high feed prices and a hog to corn ratio of 12:1 has kept the breeding herd and pig numbers about the same. The good news is the market inventory is not expanding while global demand for pork is growing. Keep in mind a year ago 53 – 54 per cent lean hogs were 81.85 lean a pound. We are 20 higher currently or $40 per head. This is despite the same number of hogs going to market. Demand for the world’s most popular meat is being proven in this 25 per cent higher price year over year.

The productivity factor can be seen clearly in the report. Pigs per litter are up .22 year over year to 10.03 – a new record. We expect productivity to increase, at Genesus we see a genetic trend line of 25 per litter of pigs born per year improvement. Genesus now has customers weaning 13 pigs per litter consistently; 3 pigs better than the 10 per litter last quarter on the Pig Report. Productivity will continue to increase, with the most successful producers utilizing the best available technology.

Ontario Pork Congress

Last week we attended the annual Ontario Pork Congress in Stratford Ontario. Our observations:

  • Ontario is unique in that there are only two producers with over 10,000 sows in the sow population of approximately 330,000.

  • Most producers in Ontario are family farmers who work in the barns, grow their own feed, and put the manure back on the land. This is real integration. A model in these times of high hogs and high feed that works real well.

  • The psychology of producers at the Ontario Pork Congress was significantly more positive than the World Pork Expo. It is probably mostly due to the $30.00 plus gain in hog process and lower feed prices in the two week time period.

  • The Ontario industry we believe is treading water. Some finishers are being built but little sow herd expansion.

  • Ontario benefits from excess packer capacity and demand for hogs is strong.

  • The Ontario Pork Congress was well organized and well attended. The producers that came got full value for their participation.

  • Looking at the producers in the industry not only in Ontario but also the ones we met in the World Pork Expo and everywhere it is amazing the resiliency and determination there is in our business. The survivor’s are now benefiting from $1.00 hogs, it is needed.