Jim Long President – CEO Genesus Inc.
December 2, 2013
US Pork Cut-outs Remain Strong
The Thanksgiving week although great for the family is not usually good for hog producers, as the holiday shortened week leads to fewer hours that packers operate. Many a year the Thanksgiving week is the lowest hog price for the year.
National Lean hogs average $80.45 last Friday. US Pork Cut-outs averaged $89.81. The $9 spread probably indicates Packers are making decent money right now. It is good Cut-outs are almost $90 as this indicates the Pork price remains strong. As the hog marketings seasonally begin to decline and the competition from Packers to keep their lines full continues, we expect a rapid increase in lean hog prices.
The lean hog price increase we expect will be aided by the lower volume of Pork in storage. 6% less (-37 million lbs.) on October 31 compared to a year ago.
It’s interesting looking at the pricing of the US cut-out/primal values.
Ribs, Bellies and Butts which are definitely going to carry more marbling and/or intramuscular fat are worth more than both loins and hams. No matter how you look at it consumers are voting with their money to pay more for ribs, bellies and butts. There is demand for what we suspect is the consumer’s desire for taste and flavour. As an industry we need to recognize this as a stark reality. Less focus on lean, more on taste and flavour.
PED continues to rip through the US. There will be less hogs coming. This past week’s US Cash Early Wean price average of $77.43 ($67-83.00) is a reflection of the demand for small pigs to fill holes, finishers and packing plant shackles that PED is creating. So far Canada doesn’t have PED. Can it be kept out? Maybe, but not likely.
Our current feed cost farrow to finish is $90 per head the same calculation this past July was $132. That’s $42 per head difference. Sure makes us feel smarter. Our farmer arithmetic on 2.5 million plus hogs USA-Canada a week times $40 = $100 million a week. The industry needs the capital, lots has been lost.
The hog price in Mexico is quite strong 85¢ USD /lb. liveweight (24.67 peso per kilogram). This past week we met with a large Mexican producer. They calculate currently that they are making $59 per head. That is real good. That type of profit sure fills the equity hole that Mexican producers created in prior months.
Lowest hog price for the year is probably here. Pork Cut-outs are strong, should give us good price boost as hog numbers decline. PED running rampant. Early Wean price extremely strong pushed by demand created by PED.
Categorised in: Pork Commentary
This post was written by Genesus