by Allan Bentley, Sales, Genesus Genetics Inc.
What a difference a week makes! I have been very active in helping producers get some of these backed up hogs to processing plants. I must admit the truckers were busy and made a pretty penny hauling hogs.
Interesting that some packers were actually making phone calls looking for pigs especially when most cash bids gained $10/cwt in one week! There were some cases of cash hogs higher than some formula prices; if pigs were really backed-up I do not think this would be happening.
There are a lot of producers moving pigs, some to packers they have never done business with. New relationships are being formed between producers and packers and it will be intriguing to see if these are long-lasting.
I disagree with some of these flat-bellied experts that are broadcasting we have 2,000,000 hogs backed-up. I am not ready to say production is real close to the knife, but it is moving in that direction. If some packers are still needing kills for this week, why on God’s green earth are futures lower? I already stated (and know for a fact) cash hogs went up $10/cwt but futures are lower? In what universe does that make sense?
I have been hard on the disconnect between futures and cash hogs. I’m not sure anyone even understands what exactly is cash hogs? There are so many different negotiated formulas for pricing that even the experts are at a loss to come up with a cash price. It is difficult to manage the basis with the complexity in all the different formulas. I have always contended that producers need to do a better job managing the basis and it has now gotten even harder. In parts of Europe, the packers and producers meet every Monday and negotiate a price for the week. Maybe that is not the answer but we need to come up with something that works for everyone in the chain.
We all know when it comes to hogs and contracts it is usually not done on what makes sense. There were some contracts based on a higher cutout percentage that fared way better than the ones based on western corn belt or a national base. But not so fast…. it appears to me that a lot of the euthanasia was done on those higher negotiated contracts. There are cases of producers that did not have any trouble getting pigs into packers although they had a lower-priced formula. Coincidence? I will let someone else be the judge. It sure appears the higher-margin pigs for the packer all got processed. Those that got backed up and euthanized were not so profitable for the packer.
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This post was written by Genesus