Pork Commentary
Jim Long President – CEO Genesus Inc.
February 3, 2014
May-December Lean Hog Futures Reach New Contract Highs
Last Friday the Lean Hog Futures May-Dec 2014 reached new life of contract highs.
The Spring-Summer markets are on fire. The combination of PED ravaging the production sector and the major decline in beef supply has and will continue to push prices higher.
Will the cattle herd recover?
On Friday the USDA released the January 1 Cattle Inventory. All cattle and calves in the United States as of January1, 2014 totaled 87.7 million head, 2 percent below the 89.3 million on January 1, (down 2.4 million head). This is the lowest January 1 inventory of cattle since the 82.1 million on hand in 1951. (63 years ago). To put in context the US population in 1951 was 154 million, 2013 – 317 million. Twice as many people.
All cows and heifers that have calved at 38.3 million, were down 1 percent from 38.5 million on January 1st, 2013. This is the lowest January 1 inventory of all cows and heifers that have calved since the 36.8 head in 1941 (74 years ago). The US population in 1941 was 133 million people.
Not to beat a dead horse but it doesn’t take a rocket scientist (or ag-economist) to see the trend-line, less cattle, less beef, less per capita consumption, more expensive beef. What’s the option for red meat? Pork! Thank goodness the lame “other white meat” program has been ended. We need as an industry to continue to improve red meat pork with better marbling, taste, flavour, darker colour etc. It’s our chance to gain demand. Demand enhances profitability.
Small Pigs
US cash Early Wean and Feeder pigs are quite strong. Last week cash early weans averaged 83.10 and 40lb. feeder pigs $101.32. Quite strong is an understatement, they’re in the stratosphere.
It was pointed out to us this week that the June-Dec spread is historically high with June at 104.82 and December 80.375. It’s 24 difference or around $50 per head. Usually the June-Dec spread is about $20 per head. The same person pointed out that $80 Dec will probably mean around $40 early weans and $60 feeder pigs. If Dec stays at 80-81 the high cash small pig market will come crashing down to normal prices. We expect December futures will gain strength in coming months.
SPAIN
We had some visitors from Spain this past week at Genesus. 2013 was a good year for producers there. They are optimistic for the future but depend on exports within the EU and to Russia. Feed is still expensive, about 30% higher than North America but market hog prices are also higher at 75¢ lb. USD liveweight.
Spain has traditionally been a very lean hog market (Pietrains) but it is interesting that demand for better meat quality is developing. Genesus has sent Durocs (meat quality champs) and it appears more are going. Like all industries better quality is always being demanded. Consumers continue to demand better phones, cars, televisions etc. Pork is no exception. The Global demand for Pork continues unabated with 44% of all meat consumed. To stay on the path of enhanced demand, leaders in the industry like our visitors from Spain know that better quality is absolutely necessary.
Summary
PED causing havoc in production. Lean Hog Futures reach contract highs. A very volatile situation.
Categorised in: Pork Commentary
This post was written by Genesus