Pork Commentary

Jim Long President – CEO Genesus Inc.


April 14, 2014


US Hog Market Continues to run $100 Per Head Higher than a Year Ago

The US hog market continues to run over $100 per head higher than last year.  It is unprecedented, with weekly US hog marketings of over 2 million a week and pork production just fractionally lower than a year ago – it is truly amazing to us this price surge.

Other Observations

  • Hog weights are at historical highs, with carcass weights reaching daily averages of 220 pounds plus.  A few months ago feed conversion was a big consideration for a genetic purchaser.  Now it’s how fast they will grow and be able to get to heavy weights but still be able to turn barns.  Max Thru Put.
  • Sow prices are at record levels.  500–549 pound sows are averaging 102.67 pounds or over $500 per head.  The latest weekly sow marketings of 55,839 head indicates normal sow liquidation.
  • Last week the USDA indicated cash early wean pigs averaged $86.34 and 40 pound cash feeder pigs averaged $135.40.  Both down $5.00 and $3.00 from the week previous.  We expect lower prices for both in the coming weeks as fall hog markets of October 99.40 and December 89.45 (last Friday) will lower profit potential relative to the summer markets.
  • We are all currently breeding sows for about the next February markets.  February lean hog futures were $86.55 last Friday.  $86.50 and $5.00 corn in our opinion means little profit potential.  Certainly not the windfall profits being made right now.
  • Fed Cattle Marketings continue to run significantly below last year.  Last week 573,000; a year ago 607,000, 6% less.  Less beef is supporting the high lean hog price.
  • US Chicken production has not increased despite high beef and pork prices.  Chick placement lower last week compared to the same week a year ago.  No more chicken supports the lean hog price.  Bottom line – less beef, less pork and no more chicken.  It’s obvious all meats benefiting pricewise from lower supply.
  • Corn prices have appreciated to about $5/bushel and soybean to over $14.50 a bushel.  There is profit potential for both crops.  This will encourage aggressive plantings in North America and every other country in the Northern Hemisphere.  Great weather will lead to big crops.
  • We were in Great Britain last week.  The country has about 400,000 sows.  40% of sows are outdoors.  We hadn’t seen A-frame huts for several years but there they were.  Great Britain is a case in point of what happens when animal welfare regulations run amuck.  Britain’s sow herd is half of what it was.  A country with excellent stock now has to watch as their country’s rules on sow housing, finishing, etc. allows Denmark and Holland ­who have less rules pour pork into their market.  Take home message, we need to fight every proposal animal welfare has on the line.  No retreat.  No surrender.
  • PED stills seems to be ripping through the US hog industry with a vengeance.  We expect 4 million plus sows have been hit, we expect that approximately 8 million pigs have died since last June.  Our current cowboy math – 8 million baby pigs dead average value of $70 = a loss of $560 million industry wide.  105 million market hogs in USA – 2014 average value increase per head due to PED – $50.  $105 million times $50 = $5.25 billion.  $5.25 billion less $560 million.  Bizarre but true cash market gain more than covers PED cost.  The one downside early hedgers before market moved up and then got PED will not be in a wonderful profit position.

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This post was written by Genesus