Hogs and Pigs Report
The U.S.D.A. released the September | Hogs and Pigs report last Thursday. The market reaction was about a $2.00 average jump in lean hog futures on Friday. Obviously, traders saw the report as neutral to bullish.
- The U.S. breeding herd expanded 10,000 in the last quarter (June to September). We are not sure if this means expansion has stopped or is just taking a pause.
- September 1 total market hogs of 69,156,000 is about 2 million higher than a year ago (67,192,00).
- That means to us over the next half year we will have 75,000 more a week to go for market year over year (3%), with the beginning of the second shift at Seaboard- Triumph in Sioux City and Prestage`s new plant. Packing capacity will increase 100,00 per week.
- Pigs per litter last quarter were up 1% at 10.72 compared to a year ago at 10.65.
- Sows farrowing in the last quarter were up 3% year over year.
- The US has more pigs for sure.
- Breeding herd stayed flat last quarter.
- It appears to us that there is more than enough packing capacity for the near future.
- Productivity gains continue with litter size up 1%. Most of the larger pig inventory coming from the breeding herd.
- As a positive for us the strong price response to September 1 report in the futures market last Friday of about $2.00.
- The market has two big factors of the unknown; What African Swine Fever in China means for Global Markets and the tariffs on U.S. pork by China and Mexico.
It is a real crap shoot to know what the future market will bring with these dynamics.
The North Carolina hog plants got back into production last week after being closed due to the Hurricane which resulted in production last week of 2,568,000 which was an increase from the previous weeks losses of 2,341,000.
We expect there will be ongoing effects from the hurricane which will result in additional pig production losses including but not limited to breeding, logistics, power, and water.
It must be a real challenge for so many producers to deal with the hurricane situation and all its ramifications, making a little snow seem like a minor irritant.
The U.S. lean hog price continued to climb last week. 53-54% lean hogs (.66¢ lb) over a month ago (.45¢ lb). This is a jump of $40 plus per head.
This jump in price was most likely aided by the North Carolina Plant closure from the hurricane and the subsequent need for pork to fill their customers needs.
In our travels last week all producers we spoke to have African Swine Fever (ASF) on their minds.
- Is China going to be able to contain and stop the spread of ASF?
- What will this mean for future prices?
- Will ASF spread to North America, Germany, Denmark and all of Asia?
These are all good and relevant questions.
In our opinion it will be hard for China to stop ASF. They will try but we have been in Russia for ten years, we have seen ASF there. We know Russia has tried to stop it and have made an excellent effort but so far have not been successful. Russia has land and strict bio security systems and protocols.
The sheer scale of Chinas industry and hog density makes the effort even more daunting.
Finally, with the announcement on Sunday of the Trade agreement between USA – Mexico – Canada (USMCA) there should be relief in the future for U.S. producers at some point from Mexican tariffs that have hurt U.S. hog prices.
This post was written by Genesus