Jim Long Pork Commentary – July 20th,2020

Jim Long, President-CEO, Genesus Inc

U.S. Pork Cut-outs Continue to Strengthen

This past week we saw some improvement once again in pork cut-outs. A week ago, last Friday they were $68.95 while on Friday the pork cut-outs closed $71.19. The increase has been 9¢ lb. over the last two weeks. We firmly believe it has to be strength in the pork cut-outs to push hog prices higher. Cut-outs show demand relative to supply. The psychology of the market is one of huge negativity. It’s almost like there is no light at the end of the tunnel. It’s hard to find much if any positivity. The only solace is it’s so bad it has to get better?

Other Observations

  • U.S. weekly hog marketing’s 2,518,000 up 130,000 from a year ago. Packers are getting hogs killed with Excellent Gross Packer Margin being great stimulus
  • 3 area lean hog price went from 07/08 – 42.72 to 45.36 – 07/16. Right direction but dismal price.
  • We expect breeding herd liquidation is ongoing. Sow slaughter is up, gilt retention is down. It would be the first time in history if liquidation isn’t ongoing in the face of losses of $40 plus per head.
  • Last week in Eastern Corn Belt – 3 packers were actively looking for hogs. Doesn’t appear to be many or any backed up hogs there.

China 

  • China’s hog prices continue to stay at a high level 36.08 RMB/kg or $2.34 U.S. liveweight a lb.
  • Early wean pigs at 100 RMB per kg.
  • China slaughtered 251.03 million hogs down 50 million from a year ago (20%).
  • Inventory end of June 339.96 million head down 2.2% from a year ago.
  • China sow herd is increasing according to the government statistics up 5.4% at the end of June compared to a year ago.

The real fact is the hog price $2.34 U.S. lb. liveweight indicates a real pork shortage and strong demand. Rabobank estimates China Pork output will decline 20% this year to 42.6 million tonnes.

China has imported 2.12 million tonnes of pork January – June. Up 140% from a year ago. There is no doubt China will need massive levels of pork in the coming months. The question who will benefit? 

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This post was written by Genesus