Pork Commentary: US Hog Price Begins Rebound

US - writes Jim Long President – CEO Genesus Inc.
calendar icon 14 December 2016
clock icon 4 minute read

Last week, we wrote that we believed that the bottom was in the US hog price. So far, so good. November 29th prices were 45.79 cents/lb lean, and December 12th prices were 52.13 cents/lb lean. Overall, a 6 cent/lb lean or $13.00 per head increase. Going in the right direction. We expect that prices will continue to increase.

USDA pork carcass cut-outs were $75.81 last Friday. This leads to pack gross margins still near $50 per head. We expect hog availability will continue to decrease in the coming weeks. Last week’s US hog marketings were 2.443 million, down 90,000 from the week before. We continue to believe packers will chase hogs in the coming weeks. Gross profit per head is as good as it ever gets.

Packers will want to hold market share, and to do that, you need to get after hog supply. The miracle of 2016 has been the lofty price levels pork cut-outs have been despite record hog kills this fall. This deluge of pork has been sold at strong prices, levels no one would have believed prior to this happening. It is a huge indication of the exciting demand for pork domestically and globally.

We are convinced summer hog prices will be over 80 cents/lb lean. If we have 75 cent pork cut-outs with 2.5 million plus hogs a week, how will pork cut-outs not reach over 90 cents/lb when weekly marketings drop in the summer seasonally below 2.2 million head a week? The only way to balance a drop in supply is to raise prices.

Other Observations

  • The US early wean price continues to ratchet higher. Up $5.00 per head from the week before. We expect $50 early weans very soon. Profitability levels in summer markets will support such prices.

  • After going through bankruptcy a couple of years ago, the travails of Choice Genetics continues. Last week, it was reported that that their Chief Executive Officer and Chief Operating Officer (both based in Des Moines, Iowa) left Choice in tandem. We understand the acting CEO is based in Europe. Choice is the owner of the once mighty Dekalb-Monsanto swine genetic companies. It is amazing to see how things have changed.

  • The China market has been very profitable for its producers in 2016, with profits over $100 USD per head. Obviously, producers have money to invest. Like producers everywhere, they wish to continually get better. Get better or get run over. With this in mind, we are pleased to say that according to the statistics from China Animal Husbandry, Genesus will import 42 per cent of all swine genetics to China in 2016, dwarfing all global competitors.

  • Why? Better Performance. Better Adaptability. Better Pork and Better Service. China is the largest hog producing country in the world. To be #1 for a second year is something we are very proud of. A testament to the whole Genesus team.

  • This week, we will be at the Prairie Livestock Expo in Winnipeg, Manitoba. We welcome all to visit us at the Genesus Exhibit. We will report our Expo observations next week.
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