Jim Long, President-CEO, Genesus Inc.
Lean Hog Prices Gain Strength
When you are an optimist you look for the positive. Last week, Thursday to Thursday U.S. National Base 53-54% lean hogs went up from 48.79 to 53.27. Still a miserable price but going in the right direction.
“I am an optimist. It does not seem too much use being anything else.”Winston Churchill
- One of our U.S. customers got offered 10¢ a lb. more for this past Saturday’s delivery compared to the week before. This for spot cash delivery.
- Three of our customers in Northern Midwest are no longer backed up with hogs as of last week. Good sign.
- Some customers have pulled hogs down to a 265 lb. average in preparation if there are plants slow down due to coronavirus. Of note, their plants had room to get hogs to this Iowa weight.
From the feeder pig world
More calls coming in by buyers. Buy lists more than supply list in some instances. Probably a sign of market price floor. Current early weans are February market hogs. Pig supply is being cut due to sow herd liquidation from higher sow slaughter (+180,000 Jan-June), lower gilt retention, euthanization of small pigs and some planned abortions. Also, demand is being enhanced by more finishing barn space being made available by higher market hog slaughter.
We expect we are seeing the beginning of a relentless increase in small pig prices over the next few months as supply continues to decline.
“I’d rather be optimistic and wrong, than pessimistic and right.”Elon Musk
Hogs backed up
The multi-million-dollar question that hangs over our industry is whether hogs are backed up by over 2 million head as some claim or are we close to current.
The prevailing consensus it appears is that 2 million are backed up. That belief hangs over the market. Every Retail, Foodservice and Foreign buyer reads the pork news. The drumbeat of the hogs backed up takes away any stimulus for any buyer to worry about pork supply. This in itself limits any market price momentum.
We watch market weights. Last week, the first four days of the National Daily Base Hog Slaughter report had an average carcass weight of 207.56 lbs; the week before averaged 210.46 lbs; same week a year ago 208.28 lbs; June this year averaged 213.41 lbs.
Our observation, it would be the first time in history that hogs are backed up significantly and hog weights are below a year ago and falling weekly.
We have written to watch slaughter weights and many do, but most focus on the Iowa–S.Minnesota weights. That is if there were hogs backed up is where they are regionally. We watched the National weights as it’s in our opinion gives more of the national picture. We believe there are hogs backed up at some farms but also farms that have pulled hogs ahead. The net effect is what matters.
This coming week if Packers driven by excellent gross packer margins keep up slaughter numbers of about 200,000 more a week then a year ago, watch the weights, if they continue to plummet the likelihood of massive numbers of backed up hogs is less likely.
“To breed a sow is to believe in tomorrow.”
Government’s responsibility is to ensure proper food supply for its citizens. In the time of this pandemic, this has been a challenge for not only the government but retailers, packers, and producers. The drumbeat of attacks on the meat industry by a couple of prominent east coast Senators (NJ, Mass.) has been steady (both states are far from food self-reliant). This has led to some retorts from Tyson and Smithfield on how they are dealing with the pandemic.
Packer Sentiments from Bloomberg articles
“As we look beyond this year, we’re prepared to navigate prolonged pandemic related uncertainty … We are investing in operational flexibility to ensure that we can continue to meet customer demand, while living in a potentially long-term COVID-19 environment.” said Noel White, President & Chief Executive Officer at Tyson Foods
Sunday’s spread echoes a national Tyson Foods Inc. commercial with the tagline “We take care of our family so you can feed yours.”
Smithfield Foods Inc. took out a full-page ad in Sunday’s edition of the New York Times to accuse its critics of false narratives and misinformation and to defend its operations to keep the nation fed during the pandemic.
The Virginia-based company calls its 42,000 employees “heroes” in the ad, and says it has implemented measures to keep staff safe and reward them for their work.
The ad accuses others of trying to use Smithfield and its industry as “political pawns,” while the company has stayed apolitical to make hard decisions and confront challenges that are “rooted in responsibility and delivered with integrity.”
“We must produce food, and someone has to do it,” the Smithfield ad reads. “Certainly it is not the critics who have answered the bell. No, it is our nation’s food and agriculture workers who have done so.”
As producers we need all slaughter plants to be operational. Any attempt to slow down the plants by politicians is a direct assault on our livelihood and future. All producers should stand with packers to ensure maximum packer capacity. Our livelihoods matter.
“I am too positive to be doubtful, too optimistic to be fearful, and too determined to be defeated.”
This post was written by Genesus