USA Market Report

Allan Bentley

abentley@genesus.com

Outside influences on markets always seem to be that black swan event we never saw coming.

In this case, the developments in the Middle East should not have any relevance on the hog market, as there is not a lot of pork consumed in that region.

There is a lot of speculation about the new packing plants coming on line, as it should increase competition between packers. But remember, a very large part of this shackle space is used by the vertical integrators, so unfortunately that may limit the space packers will actually have to bid against each other.

I am not down playing all the capacity, it is substantial and very positive for the Pork Industry. The bigger concern is where are we going to sell this extra meat?

We are growing the herd to meet the needs of these plants, so I hope we have buyers lined up to purchase the new product on the market. Everyone is counting on exports, which are around 21% of the total kill.

That does not mean we export the whole hog, much of the offal is exported, where it was rendered 20 years ago. Hams, loins, butts, etc. all have markets. What we could see is a shift in cost of each of these primal cuts. We might even need to add the offal into the mix. Products that are normally consumed in North America might get cheaper, such as loins. While some of those products that are not in the primal mix might have a greater value going forward.

Many of contracts we see with packers have a cutout value as part of the formula they pay for these pigs. However, many parts of the hogs are not calculated in the 602 report put out by the U.S.D.A.

The saying “we sell everything except the squeal” is more relevant today than 20 years ago. As the cash market moves higher after Lent, that should pull up those futures prices heading into summer giving us a better hedging opportunity for the fall.

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