Jim Long President – CEO Genesus Inc.
December 9, 2013
US PED Continues to Have RamificationsThis past week the spread of PED continued with it now in Nebraska. PED is cutting production, leading to greater demand for cash early wean and feeder pigs. This past week US Cash early weans averaged $79.56 ($69-87) while cash 40 lb. feeder pigs averaged $82.25 ($73.50-89). To contrast the cash market you only need to look at early wean prices on contract with a formula price $47.63 ($38-77.87). The average price difference of $25 is big. We expect there has been times in the past when the contract price was $25 per head higher than cash. Very volatile situation and business. Question: At what price do early weans reach the ceiling price? When we see $87.00 as a top last week, we have a hard time figuring how they will make money with those pigs unless you figure barns at no value. If the cash early wean price is a true reflection of market supply and demand (it is) we sure wonder how high market hogs will reach next summer. No one is bidding early weans to these high prices because they don’t want to pay that much. The reality is they have to pay it to get them. When we think about what the early wean price means about current pig supply we certainly won’t be surprised to see US market hogs reach $1.10 next summer.
Closeout PerformanceDr. Tom Stein, Chief Innovations Officer, Executive Chairman and Chairman of the Board of Directors at Meta Farms (That’s a long title) recently penned an article and provided data from what Meta Farms (provides software systems to help manage livestock data) has seen on finishing pig closeouts.
GiltsIt will be interesting in the coming months as hog prices improve and demand for gilts increases how much PED will affect gilt availability. There already has been breaks in several gilt multiplier herds (Touch wood, no Genesus herds). When the breaks happen we suspect the industry will not accept gilts from such herds. Will they be depopulated? How short will silt supply be? Some genetic companies with gilt multiplication in concentrated areas are more prone to a break? Already gilt prices are being increased due to the purchase of Genetiporc by PIC. The effects of PED could have a long tail?
SummaryMore and more as we look at cash price of early weans and feeder pigs we believe the US summer hog market could reach $1.10 lean a lb. or more. We believe it ourselves and have put several thousand more pigs on feed. Maybe we are wrong but our skin is in the game. Time for us all to make some more money.
Categorised in: Pork Commentary
This post was written by Genesus