Pork Commentary – January 19, 2015 – Bloom off Rose in US Markets

Pork Commentary

Jim Long President – CEO Genesus Inc.

info@genesus.com

January 19, 2015

Bloom off Rose in US Markets

  This week we will be at the Banff Pork Seminar. If you are there come visit us at the Genesus Reception in the St. James Pub downtown Banff Tuesday 9 pm until close and/or visit our exhibit at the seminar site. Markets The bloom has gone off the rose in the US hog market. Last week 53 – 54% National lean hogs were 75.43 per pound, same week last year 79.89. Lower hog prices year over year. Certainly the edge we had in lower pork supplies from PED has been lost. PED was the most money making event for hog producers in this generation. A somewhat bizarre statement. The simple fact of inelastic supply – demand with a commodity like pork, is when there is a cut of 5% of supply (from PED), it leads to record profits. The sow herd expansion is underway. We sell swine genetics. Genesus is currently stocking several production units. Our competitors are too. More pigs are coming. The hog cycle is alive and well. Record profits in 2014 (The Year of The Pig Farmer) are being ploughed back into the industry. It’s hard for us to believe that pork cut outs at 84¢ per pound with the beef cut outs at $2.50 per pound, the spread will not narrow. With the lack of beef available, we expect in the coming months major pork features in retail pushing product. June lean hog futures closed at 86.65. We believe they are over sold. We still expect lean hogs to reach $1.00 this summer when pork supplies go into their seasonal downward production. Canadian Dollar Canadian Swine Producers are benefiting from a stronger US dollar compared to the Canadian dollar. In July last year the Canadian dollar was 6% lower than the US dollar.   Last Friday it closed 20% lower. The weaker Canadian dollar makes Canadian pork producers more competitive compared to their US counter parts as Canadian pork prices always mirror the US situation. We do not observe at this time sow herd expansion in Canada. The recent adjustment in the Canadian dollar probably has leveled the cost of production in Canada to US cost levels. Exports US live hogs per pound were 54¢ last week. Compare this with other countries. Mexico, a major pork importer was 88¢ US liveweight per pound. It’s not hard to figure at that spread lots of pork should go to Mexico. China was 99¢ per pound US liveweight. Got to figure US packers exporters – importers will figure how to hit a 40¢ pound price spread to make some money? Brazil, a major pork exporter was 74¢ US liveweight, 20¢ higher than the USA. You’re an importer? Where you going to buy from? Brazil? USA? Obvious answer is USA. If you have choices in our opinion some of these Global price spreads are going to move US pork and in time support US hog prices. Summary We believe price spreads between beef and Hog prices in importing and exporting animals all will lead to stronger US hog prices.
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