Pork Commentary by Jim Long Nov. 1st, 2010

Bullish U.S. and Canadian Inventory Report

We haven’t had much good news the last few weeks in the hog industry with prices under challenge and a spike in feed prices.  Last week some welcome news came with the combined U.S.A. – Canada Swine Inventory Report.  U.S.A. – Canada breeding herd at 7.07 million down 2% from a year ago, and market hog inventory at 69.8 million was down 2% from last year.  The pig crop was down 2% as well as sows farrowed.  The bottom line is 2% less sows, 2% less market hogs, 2% less farrowings, and 2% less pigs born.  All in all 2% less everything.  This is bullish as we move forward.  This summer we had hogs in the mid 80’s.  It is hard to believe 2% less won’t result in even stronger prices as we go forward.

CANADA HOGS ON FARMS

QUARTERLY REPORT (thousands of head)

YEAR The Downward Trend Continues All Market Hogs
2005 1619 13585
2006 1582 13317
2007 1543 12816
2008 1417 11327
2009 1349 10605
2010 1298 10555
The Canadian Swine Industry continues to contract with breeding herd down 51,000 from last year and 321,000 lower than five years ago (-20%).  The Canadian market hog inventory is down year over year 50,000 while its dropped 3 million in the last five years (-24%). Canada’s hog producers have been hit hard by a higher Canadian dollar, country of origin labeling, and the general financial situation all hog producers have faced over the last five years in North America.  The current par dollar Canada has with the U.S. coupled with current hog prices and feed costs will in our opinion lead to a further contraction of Canada’s hog industry.  Some producers will come to the conclusion that having hogs is not having fun. Other Items
  • The U.S.D.A. cut – outs were 73.68 last Thursday.  The National Base price 53 – 54% lean hogs were $65.78 the same day.  We have seen a $30.00 per head price drop in the last three weeks.  Prices keep declining – where’s the bottom?  We believe in the next ten days.
  • Chicken producers are doing their part to limit meat protein production?  Egg sets up 10 million a week, chick placements up 10 million (+7%) year over year.  Maybe they know something nobody else knows.  $5.00 plus corn and expand chicken production?  The last time the chicken genius’ tried this the largest company Pilgrim Pride went broke.  Chicken prices are 80 cents per pound, last year they were 72 cents.  Time will tell how all this plays out but it appears the poultry companies are playing a game of chicken with each other.  Probably one of them will crash.
  • Hog slaughter weights have exploded hitting record levels.  New crop corn has pushed growth and it’s been extraordinary.  The Iowa – Minnesota live weights released last week averaged 275.3 pounds, the week before they were 274 pounds, a year ago 269.9 pounds.  Year over year 5.4 pounds heavier, this year these larger carcasses are putting more pork on the market and pushing hog prices lower.  Packers have the hammer – lots of hogs, lots of heavy hogs and producers calling them to sell.  The old adage ‘who’s calling who’ is reflected in the $30.00 per head price decline in the last three weeks.
  • National Direct Cash Early Weans averaged $37.90 last week and 40 pound feeder pigs $50.71.  High feed prices have pushed these prices lower over the last few weeks.  The good news for small pig sellers is the space pendulum is going in their favor.  The seasonal of small pig supply is for it to begin to contract just as finisher space opens up seasonally with the boost of new crop corn. Therefore fewer pigs available will be being chased by a greater number of finishing spaces.
Summary The U.S.A. – Canada combined inventory 2% less sows, 2% less market hogs, 2% less farrowings, and 2% smaller pig crop.  Everything is 2% less.  Tough hog markets currently but supply will decline seasonally year over year.  Work through the next few weeks and prices will rebound.
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This post was written by Genesus