No Break in Grain Markets
The U.S.D.A. released a revised 2010 crop production report last week. The corn crop was revised down to 12.45 billion bushels 600 million bushels lower from the crop a year ago. Soybean production was trimmed to 3.33 billion bushels. The U.S.D.A. lowered U.S. and world ending stocks in corn and soybeans. When the dust cleared, March corn had gained 45 cents a bushel while March soybeans jumped 57 cents a bushel. Good for grain producers but it would take the optimism of a child seeing a pile of manure and figuring a pony is inside to see much upside for the hog market. The hog to corn ratio is now below 12 to 1. Six months ago it was 24 to 1. There is never swine herd expansion at a 12 to 1 ratio. We expect history will repeat itself. We can continue to thank our Government leaders who have sold out the poultry and livestock industry with the crazed idea that corn ethanol production is the panacea for fueling vehicles. Subsidizing the heck out of corn ethanol while leaving meat producers on their own. We pay taxes too?! Look no further than China – they do not subsidize corn ethanol production, it is illegal to produce corn ethanol in China. Last week we talked to a grain producer with several thousand acres. He said that in his opinion corn ethanol has had little effect on grain prices due to the DDG’s that can be feed. Our answer if corn ethanol can stand on its own, it doesn’t need subsidies and tariff protection. Let’s level the playing field and at the same time stop mandating ethanol use. Check the fuel mileage of E85 versus regular fuel. How is the lack of efficiency economic or environmentally sound? Hog Market- The Iowa – Southern Minnesota price last Friday was $73.42, while pork cut outs were 85.14. The $12 spread is about $25 per head margin for packers. Packers are making very good money. Time will tell as the supply of hogs decline seasonally if this spread can be maintained.
- The latest Iowa – Southern Minnesota market weights are 275.6 pounds live weight up 6.8 pounds from a year ago. To see a bounce in market hog prices we believe that we will have to see weights start coming down from this unprecedented level.
- Lean hog futures continue strong reflecting the scenario of supply and demand. Friday close June LH 95.475, October 83,650. It is very fortunate that the lack of supply of pork with perceived demand strength is pushing future prices higher. With $6.00 corn the losses would be devastating if it were not for these potential higher prices.
- The continued strength of the small pig market is a sign of bullish sentiment for high hog prices. Last week U.S. cash early weans averaged $58.68(high $67.00), while 40 pound cash feeder pigs averaged $75.13(high $82.00).
Categorised in: Pork Commentary
This post was written by Genesus