Random Observations

Jim Long Pork Commentary
calendar icon 29 June 2022
clock icon 3 minute read

Last week the U.S. Federal government filed a brief to the U.S. Supreme Court against California’s Proposition 12 a law to ban Pork from pigs that don’t meet California’s production standards. This is good news for Pork producers in our opinion. The Solicitor General of the U.S. now stands with Pork producers against California legislation. Our bet is now Prop 12 has a better chance to lose in a conservative Supreme Court.

Harvest has begun in Southern Ukraine, currently wheat-barley $80 a tonne = approximately $2.60 a bushel. We expect there will be great effort to move grain to higher price markets.

U.S. Beef Cow and Heifer Slaughter
January-May
20212022
Heifers4,059.644,171.7
Cows1,394.911,611.2
Total5,454.555,782.9

Year to date 328,000 more Cows and Heifers to slaughter compared to a year ago. The U.S. is projecting 1.9 billion lbs. less Beef to be produced in 2023 than 2022. Certainly, would be supportive of Beef and Pork prices.

There certainly seems to be price pressure on grains and oilseeds.

Contract HighLast Friday closeDecrease
Corn bushel December$7.66$6.74-92¢
Soybean meal October$440$389-$51
Wheat bushel September$12.85$9.36-$3.49
Canola bushel November$11.21$8.70-$2.51

No doubt there has been a decrease from contract highs. Lower feed prices certainly would help hog profits. We believe in most areas of the world hog production is decreasing. This will certainly cut the need for ingredients in feed.

U.S. Sow Slaughter
Year to date January-May
20212022
1,333.611,261.7

A decrease year to date 72,000.

Sow herd according to USDA on March 1 was 6.098 million, a year before 6.215 million. A difference of 117,000. With a lower sow inventory, you would expect less sows to be slaughtered. Let’s assume 50% animal replacement = 117,000 x 50% = 60,000 or expect 5,000 less sows slaughtered per month. January-May 5 months x 5,000 = 25,000. Our thoughts are the U.S. breeding herd is not moving significantly either up or down when we look at current sow slaughter, relative to breeding herd size and record sow mortality. Dead sows don’t get to sow slaughter.

Last week Spain the largest swine-producing country in Europe reached record hog prices for this century. 1.63 Euros/kg up from a low of 1.02 Euros/kg in January (77.97¢ lb. – 52.70¢ lb. liveweight). One of the reasons prices are stronger is lower hog numbers. Prior to Easter weekly hog numbers exceeded the year before. Since Easter most weeks have been lower year over year. Financial losses always end up cutting hog production. Ongoing sow liquidation throughout Europe driven by losses from record feed prices continues to cut hog numbers and push ho prices ever higher.

We have been writing for months that China was having a massive sow liquidation due to unprecedented financial losses. We also have written the truth will be in the price of pigs.

The Market Low was Week of March 18th
National Hogs AverageFeeder 15 kg
RMB/kgU.S./lb.RMBU.S.
March 18th11.9885¢377$59.60
June 24th17.96$1.21675$101.1

Certainly, the price of hogs and feeders has increased. Market hogs up 36¢ lb. (270 lbs. x 36¢ = $97 per head). Feeder pigs up $41 per head. No one pays more than they have to. Price is up because of fewer hogs.

We expect China’s hog price will continue to increase as fewer and fewer hogs come to market due to sow herd liquidation. In the not-too-distant future, we expect the higher China hog price will lead to an increase in pork imports supporting EU and U.S. hog prices further.

Summary

Less hogs in North America, Europe, and China will continue to push hog prices. It’s unprecedented that the three major hog-producing areas of the world (75% of the world’s production) all have decreased output at the same time.

Laurence Williams

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