Pork Commentary

Jim Long, President-CEO Genesus Inc.

March 20, 2017
U.S. Market Update

The U.S. lean hog price is flat lining over the last couple weeks, hovering around $0.71/lb for 53-54% lean hogs.

Other Observations

  • Iowa-Minnesota Average Hog Weight a week ago 281.9 lbs liveweight, down 1.5 lbs from a year ago (283.4 lbs). Tells us hogs are moving about the same schedule as a year ago.
  • Early weans and feeder pigs are staying at relatively strong prices reflecting good demand and moderate supply. Last week, cash early weans averaged $42.36 USD each and cash 40 lb feeder pigs $76.73 USD each. Feeder pig prices reflect a late July marketing period. Early weans mid to late September.
  • Last week, U.S. National Base Lean hogs 53-54% were $0.71 lb. A year ago, they were $0.65/lb. The $0.06 difference is $13/head higher than last year.
  • Last week, U.S. hog marketings were 2.335 million. A year ago, the same week was 2.188 million, a 6.5% increase. Year to date, U.S. hog marketings are 25.272 million, up 0.7% from last year’s 24.450 million. Year to date, a small increase but stronger lean hog prices are indicating good demand.
  • Canada and U.S. are closely linked when you consider total supply. Year to date Canada has slaughtered 4.110 million hogs, up 20,000 head from a year ago. Total Live Hog Exports to U.S.A. are 0.993 million head, down 10,000 from the same time a year ago (combined market hogs, small pigs, sows, boars). Obviously, Canada’s total production is almost the same year over year, not altering the U.S. total year over year picture significantly.
  • Robert Hunsberger does a weekly calculation of profitability in Canada. He estimates at current prices, average producers’ profit from farrow to finish is $18.50 USD per head. He also projects profitability for a year ahead using forward contract prices of Lean Hogs, Corn, and Soymeal. Projection currently is $17.25 USD per head profit for next twelve months.
  • The U.S. Packer Kill and Cut Gross Margin has come down from the lofty heights it had for a few months. It is now in the $20-25 range/head, while for several weeks it was over $50. It will be interesting where the Packer margin goes over the coming months, as the new U.S. plants come on line. We don’t expect to see $50 per head packer margins for years as packer capacity coming into production far exceeds what will be supply. In our opinion, October Lean Futures at $0.67/lb and December at $0.63/lb reflect the reality of greater packer capacity relative to last fall when lean hogs were in the 40’s and low packer capacity gave suppliers little market flexibility.
  • This week, we were asked if we were having a feud with Topigs-Norsvin because we revealed the fact they had financial losses of $6.91 million USD in their latest fiscal year. Indeed, what we find interesting is that they claim to be the second largest genetic company (actually, nobody really knows), but then they lose $6.91 million USD while PIC (the largest genetic company) makes around $50 million USD a year. Feud not, bewilderment yes.
  • This past week, we spent time with two Russian companies with combined existing production of 33,000 sows. Both have packing plants. Both farm large tracts of land, over 100,000 acres. Both companies expanding up to 12,000 more sows. Profits continue to be good in Russia, especially if they can get good production. Profits over $50 USD per head. Russia can have as low a cost of production (feed-labour) in the world as anywhere if they can get competitive production. Some of the better companies are, but there is still room for improvement. The better hog price in Russia, 99 rub/kiloweight ($0.76 USD liveweight/lb), is 50% higher than Brazil at $0.53 USD/lb and U.S. at $0.51 USD/lb, while Spain is at $0.60 USD/lb. Russian producers benefit from sanctions that restrict pork imports, this increases prices and profits. The Reality is the higher hog prices also will make it more difficult to export pork competitively. As a producer, we would take higher profits over exports if we had the choice.

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This post was written by Genesus