In the last week U.S summer lean hog futures have jumped 6¢ lb. or about $12.00 a head. Its great to see some life in the hog market after watching it sink continually for the last few weeks. Current Lean Cash hog price in the 50’s means most hog producers have been losing money, its not a fun time, producers need higher prices.
Sow slaughter is a reflection of profitability and expansion. The U.S sow slaughter January-March is 24,000 higher year over year. March was 15,000 higher this year compared to last.
Sow Slaughter (thousand head) | |||
| 2016 | 2017 |
|
Jan- March | 725.4 | 749.3 | +24 |
March | 257.5 | 272.1 | +15 |
Sow marketing’s are higher this year compared to last. The March 1 U.S hogs and pigs report indicated a decrease in the U.S sow herd from Dec 1 to the end of Feb. The higher sow slaughter year to date is a reflection in our opinion of a sow herd not growing significantly.
We find it interesting when some commentators express the opinion that new packing plants are leading to rapid sowherd expansion. Could be, but in our opinion expansion comes from profitability. We haven’t had profitability as an industry that matters since last August. No independent producer is expanding due to a new packer plant; independents will expand because of profits. Some of the Packer owners are adding sows but we don’t believe its adding sows at a rapid rate. Some of the pork powerhouses that are involved in packing have bought existing sow facilities; they are growing their sow herds but not the total sow herd.
Lean Hog Futures
On April 21 lean hog futures for July were 69.225 last Friday April 28, 7 days later July closed at 75.225. The 6¢ lb. jump we wrote about earlier October lean hog futures also jumped going from 62.425 April 21 closing April 28 66.650, 4¢ a lb. jump or about $8 per head. The increase of July lean hog futures follow the roller coaster of prices we have seen. March 14, July was 79¢ dropped to 69¢ April 21 now have rebounded to 75¢.
Feeder Pigs
Cash Feeder Pig Prices are real reflection of supply – demand – profitability. At the first of April 40 lb. feeder pigs were averaging $77 each. Last week, four weeks later U.S 40 lb. feeder pigs averaged $56 each. A drop of $20 per head in four weeks. The lean hog futures dropped in the same time frame, with this drop feeder pig prices took a big hit.
Summary
We look at sow slaughter and we question if there is significant sow expansion. We know the new packing capacity is coming. Exports and Domestic Pork Demand is good. We expect lean hog prices will push to 80¢ lb. this summer.
Categorised in: Pork Commentary
This post was written by Genesus