Allan Bentley, Sales, Genesus Genetics Inc.
A couple of interesting observations. The negotiated cash hog price is $10 – $20 higher than most formula pricing. In public, the packers are saying they are full and not really looking for any pigs. Well, someone is! I think they are trying to talk this market down. Behind the scenes is a different story. They are competing in every group that is available. Funny how that works.
Packers are very good at forward selling meat. They have orders to fill and need those pigs coming to the plants. That is part of market transparency that we don’t see. When it became popular to use cut-out values to determine the price a producer gets paid for hogs, packers then moved to more forward pricing. You can actually see this yourself. Look at the number of car loads of sales that make up the cut-out value. It might be 10% of the daily carloads. Older sow units are shutting down. The producers that also farm are finding it easier to haul $7/ bushel corn to town than walk it off the farm. It is not just limited to that group of producers either. I heard this week another 10,000 sow spaces are for sale or rent. Prices are good and will continue but margins are still thin and will also continue to struggle.
As I stated cash market is King right now. That is also the case in the cull sow market. $80 cull sow price is in the future. My guess is even this week. That provides a good opportunity to move those older sows and replace them with new gilts and make a little bit of money doing it. As much as we understand inflation in the cost of hog production inflation is also a very real issue for American families and like the higher feed cost, I don’t see inflation for everything going down. PRRS has subdued and I am not hearing of as many breaks. Vets are really getting good at shutting these herds down and controlling them within about 5 months. This current heat should be supportive of prices. I don’t need to tell anyone how it affects every part of hog production.
If I was a betting man, I would be buying futures. I think futures are $5.00 short from just the effects of this heat. We will see. December looks to me like it needs to trade at $89. April needs to be closer to $100.
This post was written by Genesus