U.S Lean Hog Prices Continue to Go Higher
A month ago the U.S lean hog price for 53-54% hogs was 60¢ lb. Last Friday they were 74.74¢ lb. a $30 per head increase in a month. Now producers are getting profits not just red ink. We expect lean hogs to continue to get stronger in the coming weeks.
- A factor supporting U.S pork exports is the lowering of the U.S dollar relative to many currencies. The U.S dollar index reflects this declining from 103.21 at the first of January to closing at a six month low Monday at 96.97 a 6% decline. A lower U.S dollar supports higher U.S hog prices and their global competitiveness.
- The latest data we have on U.S pork exports is March (227,955 metric tons) which was 16% higher then the same month last year. March topped the previous monthly high set in November 2016. A U.S dollar decline that we are seeing currently should support U.S pork exports ongoing.
- It appears to us hog weights are declining. U.S lean hog weights were 212.24 a week ago and appear to be dropping with Monday dropping to 209.66 lbs. A year ago they were averaging 212.91 lbs. It appears to us producers are marketing aggressively to stay current, when sustained hot weather comes we expect a further rapid decline in market hog weights.
- July lean hog futures have now breached 80¢ lean a lb. It’s amazing what a month can do. On April 21 July lean hogs were at 69.225¢ lb. Now over 80¢. Psychology, Supply, Demand go into what happens in a market. The pendulum has swung and the market is bullish.
- The Pork market can handle the higher lean hog prices. U.S pork cut-outs Monday were 87.83¢ lb. There is still 13¢ lb. spread between cut-outs and lean hog prices. Packers are still doing quite fine. As the new packing plants come on stream this summer packer margins will decline. This giving producers a better share of the pie.
- Pork Packers have been making good money. This is a positive for our industry, strong packers have resources to pay for hogs. Keep plants modern and push domestic and export sales.
Case in point is Tyson, which recently reported a record first 6 months. Net Operating Income $1.605 billion.
Tom Hayes President and Chief Executive Officer of Tyson Foods “Our Beef and Pork segments generated tremendous operating income in the second quarter, allowing us to invest in the long term growth of our value added businesses.
Strong Packers are good for producers. When Quality Packers went out of business in Canada, many producers didn’t get paid for their hogs. Also with the demise of Quality and less competition, producers got paid less for hogs going forward. The new U.S plants and many strong packer balance sheets will be good for producers this year and for several to come.
This post was written by Genesus