Better but not good enough Iowa – Southern Minnesota’s lean hog price averaged $62.30 last week which is at a price that most producers are losing money.  Hog prices have gotten better from the dismal lows of the last months, but still there is little financial relief.  Unfortunately, the massive equity crater that has been created over the last two and a half years is getting no smaller.  The brutal reality of the financial situation is continuing to take producers out of production.  Weekly we hear of sow units quitting voluntarily or involuntarily.  This carnage continues to cut our production base. Other Observations §  In the last month, March corn has gone from $4.25 to $3.50 a bushel – that is a 75 cent a bushel decrease.  March Soybean Meal has decreased from $310 a ton to $270 a ton in the last month.  Put together in the last thirty days feed costs to produce a market hog has decreased $10.00 per head.  It’s going in the right direction. §  Corn and Soybean prices have not only come under pressure from what the U.S.D.A. has projected as record domestic production but from ongoing reports from South America where both Argentina and Brazil are expecting to record production.   We can only hope that all the bearish grain news pounds the prices lower.  In the last month the price of crude oil has dropped from about $84 to $71.  We can only hope oil drops further, giving the people who burn corn for ethanol continued challenges. §  U.S. hog marketing’s have now been down year over year for five consecutive weeks.  The current average lean cost of 51 – 52% hogs is 64.71 while a year ago the lean price was 57.47.  The real good news is hog marketing’s have been down well over 4% a week but average lean hog carcass weights are averaging about 2 pounds less than last year.  Less hogs, less pork tonnage and lighter weights certainly don’t indicate anything but a current hog inventory. §  The U.S.D.A. cash early wean and feeder pig report last week indicated prices that have held despite the drop in lean hog futures over the last three weeks.  Cash early weans averaged $46.34, 40 pound feeder pigs $67.18.  At these prices small pig producers are making money.  It is a long way from the $5.00 pigs of mid August. §  The sow herd is old.  We have seen several sow parity reports of Genesus customers.  Lots of herds with a high percentage of sows six plus parities.  All herds generally drop born alive after six plus parities.  This will impact productivity.  At some point there will be a massive influx of gilts needed.  It’s like the car industry, as car age increases, the pent up demand (need) for new cars increases. §  There are increasing reports of mould and mycotoxin issues in the U.S. corn crop.  There is significant testing available and mould inhibiters.  We suspect and speculate that there will still be breeding and growth problems in some production herds.  If it only affects 1% of both and it leads to fewer pigs and less pork.  Price enhancing. §  Canada’s National Financial Program to take hog producers out of production has accepted the equivalent of 104,000 sows to stay out of production for three years.  We expect the number will exceed 120,000 sows by the time the program is completed.  Fewer sows in Canada cuts North America’s production base and supports prices.  Canada’s days of the world’s largest pork exporter are over. Pork Continues to make demand strides Last week the President of Argentina discussed the Viagra like merits of pork consumption.  Now Maple Leaf Foods sponsored a National survey which confirms Canada’s love for bacon.  Keep the good news coming! Asked to choose between bacon and sex, 43 per cent of Canadians would choose…bacon! MISSISSAUGA, ON, Feb. 3, 2010 (Canada NewsWire via COMTEX) — Maple Leaf celebrates launch of new reclosable packaging with a For the Love of Bacon survey According to a recent national survey, Canadians are passionate about bacon. When asked to choose between bacon and sex, more than four in 10 (43%) chose bacon! Maple Leaf commissioned this Angus Reid For the Love of Bacon survey to mark the launch of their newest product innovation, Maple Leaf Reclosable Bacon. “We wanted to probe how deeply rooted Canadians’ passion for bacon is – and the For the Love of Bacon survey sure opened our eyes!” explained Adam Grogan, VP Marketing, Maple Leaf Foods. “Our research also told us that Canadians’ number one frustration with typical bacon packaging is that it can’t be reclosed (71%) and that it’s too messy (52%). We know people love bacon, and now with Maple Leaf Reclosable Bacon, they’ll love the package too!” The packaging innovation should be welcomed, according to additional survey results, as nearly three out of four survey respondents (73%) said they love bacon. In fact, nearly one in five Canadian men (18%) agreed that some days, they just can’t survive without bacon. Bacon: The key to a man’s heart? Ladies, thinking about which fragrance will woo a man? Think bacon. When asked to rank various aromas by preference, 23% of men ranked bacon as number one. And it seems bacon lovers think they are better lovers. When asked if they are good lovers, four out of five respondents (82%) who said they love bacon, also said they are good lovers. And when asked if they are romantic, four out of five respondents (81%) who said they love bacon also agreed they are romantic. The survey also revealed some noteworthy regional differences. It may be bacon trumps love in the Prairies. Nearly one in four of respondents (23%) from Manitoba and Saskatchewan wondered if ‘my partner loves bacon more than me’. Maybe a little more sizzle in the bedroom instead of the kitchen is in order… Of note – western Canadians are especially enamoured with bacon. Of respondents from British Columbia, 50% said they would give up sex before bacon, versus 37% of respondents from Quebec. About Maple Leaf Reclosable Bacon Maple Leaf Foods is Canada’s market leader in the bacon category. Maple Leaf Reclosable Bacon is centre cut and the reclosable tray is 100% recyclable. Learn more at About Maple Leaf Foods Inc. Maple Leaf Foods Inc. is a leading Canadian food processing company. Headquartered in Toronto, Canada, the Company employs approximately 24,000 people at its operations across Canada and in the United States, the United Kingdom and Asia. The Company had sales of $5.2 billion in 2008. About the Maple Leaf For the Love of Bacon survey From December 1 to December 2, 2009, Angus Reid Public Opinion conducted a survey among 1,006 randomly selected Canadian adults who are Angus Reid Forum panelists. The margin of error – which measures sampling variability – is +/- 3.1%. The results of the online survey have been statistically weighted according to the most current education, age, gender and region Census data to ensure samples representative of the entire adult population of Canada. SOURCE: Maple Leaf Foods Inc. Summary Hog prices were static last week.  Feed prices are lower.  We expect a bounce in lean hog prices over the next few weeks.  Lower supply with growing domestic and export demand will push hogs higher.  We expect cash hog prices will be the motivator for the markets not lean hog futures.

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