Hog Market Languishing

The U.S. – Canada hog market is languishing in the mid 70’s. The rapid appreciation of the U.S. dollar since mid April relative to other global currencies has taken the competitive edge of U.S. pork exports.  The 10% plus increase of the dollar has in many ways been reflected in the lower price received for market hogs. U.S. hog marketing’s continue to stay below the year ago levels (-3.6%) which is a reflection of smaller inventory that the U.S.D.A. continues to find.  This is positive for prices to stay above profit levels.  Unfortunately, our industry’s dilemma is that hogs in the mid 70’s, although profitable is no panacea for the huge equity hole that was created in the thirty months prior to April.  Mid 70’s might be creating $12 – $15 per head in profits but is no bonanza! The one factor that might be a silver lining in the mid 70’s price is that it has probably taken whatever exuberance there was out of the need for expansion psychology.   Some days we wonder if the only way we can get pork buyers excited about our industry is to send them Viagra.

Other Observations

• Sow prices continue to be strong with 500 – 550 pounders bringing 57 cents per pound last week.  Sausage demand must be good.
• Cash early weans are mid $40, 40 pound feeder pigs mid 60’s.  Extremely strong prices for this time of year.  Obviously reflecting lower pig supply and empty finishing spaces chasing them.
• U.S.D.A. last week revised the corn crop  scenario to show lower inventory and supply.  This bounced corn 30 cents per bushel higher.  The corn market the next few weeks will be weather driven.  We expect it will be volatile.  U.S. corn exports appear to be slowing.  The higher U.S. dollar is affecting corn export demand just like it has had a negative effect on U.S. hog prices.
• We still hear of producers considering quitting – they are tired.  Buildings and equipment continue to age and deteriorate.  Generational transition is an ongoing dilemma.  Many have told us they don’t want their children marooned in the swine industry.  Demands for continual  gains in productivity to remain competitive weighs on people.  All of this adds up in our opinion to continual erosion of the production base.  A reflection of this is hog barns that burn down.  How many are rebuilt?

Global Demand

All is not bleak.  The International Meat Secretariat  is projecting the global growth of beef and pork of 40% by 2025.  To service this meat demand we will have to produce upwards of 400 million more hogs globally a year.  Over the next 15 years that’s an increase of 30 million plus more globally per year.  That is expanding Canada’s production each and every year. We believe the global pork for export will be mostly positioned in the U.S.A. and Brazil, but all countries will benefit from the increase in pork demand for increasing populations. The main take home message is pork is wanted!  44% of global meat protein consumed is pork.  The global pork demand is growing.  We are not producing an unwanted product to the contrary a projected 40% increase by 2025 (2.5% per year) is a great reflection that we are in an industry that has legs.

Categorised in: Pork Commentary

This post was written by Genesus