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Jim Long's Pork Commentary » January 11, 2010 January 11, 2010
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| 2008 | 2009 |
| Canadian Market Hogs | 20,156 | 20,516 |
| Feeder Pigs- Early weans exported to the U.S.A. | 8,716 | 5,976 |
| Export to U.S.A. Market Hogs/Barrows/Gilts/Sows | 2,206 | 1,135 |
| TOTAL | 31,078 | 27,627 |
The numbers show 11% fewer Canadian origin pigs in 2009 versus 2008 and that is 3.451 million pigs less year over year. In Canada, liquidation continues with 10's of thousands more sows slated for the Canadian Government Transition Buyout Program. We see absolutely no reason why Canada's origin based hog production will not be at least one million fewer in 2010 compared to 2009. Less pigs, less hogs is positive for market price appreciation.
China
We hosted some visitors from China this past week. Hog prices in China are hovering around 80 cents U.S. live weight per pound. Price is always a reflection of supply and demand. Price point of 80 cents will pull pork exports into China. China has 1.3 billion people - they are big pork consumers on a per capita basis. Pork will be imported from the U.S.A. in the coming months directly and via Hong Kong. There is too much opportunity for China importer profits for it not to happen.
H1N1
It appears to us that the effect of H1N1 (swine flu) severely hurt our prices. On August 14, when we would normally see strong seasonal hog prices, pork cut outs were 52.31 and Iowa - Minnesota was 46.43 lean per pound. Mid August when the fear mongers in the media were exaggerating the potential consequences of H1N1 (unfortunately named swine flu). Now that H1N1 has dropped for all intents and purposes off the media radar. We have Iowa - Minnesota at 65.45; almost $40 per head higher than mid August. Seasonally counter - cyclical. The surge in hog prices can be attributed almost totally to increased demand as daily hog marketing's are very similar to August. There is no doubt domestic and global demand for pork is recovering and this has lead to stronger prices. The $40.00 per head difference is $100 million difference in the U.S.A.-Canada industry weekly cash flow. Our industry desperately needs the extra cash.
Mexico
Some areas in Mexico were touching 23 pesos per kilogram last week, or about 77 cents U.S. live weight per pound. The huge decrease in production in Mexico has pushed prices to levels unprecedented when you consider the price spread with the U.S. market and an open border. The high Mexican price is encouraging the U.S. hog price. Mexican pork imports from the U.S.A. will set records in 2010.
Summary
Canada has had massive liquidation, Mexico the same, while the U.S. production base has shrunk. We expect the NAFTA countries could be down 8 million market hogs in 2010 compared to 2008. Couple this with the ending of H1N1 (swine flu hysteria), an improving domestic and global economy and a low U.S. dollar. Put it all in the mix and we believe Cash Hogs will be significantly higher than current lean hog futures reflect. We continue to see scenarios that will lead to some 90 cent lean hogs in 2010.
Quote: ‘The reason people in any organization are afraid of rocking the boat is that it makes everyone uncomfortable. That is just the point of rocking the boat. Know when to rock it. Then rock it.'
