Pork Commentary

Jim Long President – CEO Genesus Inc.

July 8, 2013 ________________________________________

December Corn Goes Below $5.00

Last Friday December corn closed was at $4.91 a bushel – the first time December corn closed below $5.00 for over two years. The market is reacting to a record US corn planting (highest since the 1930’s), favourable weather and moisture. The scenario could lead to a record US corn harvest. How low could corn go? In Brazil last week bid prices for corn per bushel were as low as $2.54 per bushel at Rondonopolis. Other areas were higher in price and some up to the mid $4.00 mark but the idea of $7.00 corn in the coming crop year is getting to the level of delusional thinking in either Brazil or the US. We have expressed the opinion several times that the hog market and its potential profitability is currently tied to feed prices. We are a corn market not a hog market. Corn price goes down, hog profitability goes up. The supply of hogs is relatively static. For the next year as the US Hogs and Pigs Report showed us last week, we can expect little change in hog supply. To some extent hog prices are profitable within $10.00 per head. Corn and feed though have a window to affect hog margins up to $30 to $40 per head from where it has been. The current scenario of potentially lower feed prices and static hog supply with what is already historically high hog prices is setting up for fifteen months of quite positive returns for hog producers. We expect many producers will average $20 plus per head profit farrow to finish the next fifteen months.

Hog Market

The US hog market continues its strong run with lean hogs over $1.00 per pound. Weekly hog marketings continue to run very close to last year despite the fact last year had the hottest summer on record. We expect lean hog prices will continue to hang around $1.00 until mid – August.

The canary in the mine for the markets is currently early wean and feeder pig prices. A year ago early weans were below $10 and feeder pigs $18. This year early weans are over $30 and feeder pigs are over $50. We are told repeatedly by feeder pig brokers demand is outstripping supply – this despite July usually the worst time of year to find buyers. If this keeps up we expect early weans could be $50 in October and feeder pigs $70. December corn goes lower in price? We are low with our price projection.


The Economist 2013 Edition has some interesting data. July 8


No doubt the United States has the most arable acres and the greatest capacity to produce food with 417,081 million acres. China has a large amount of arable acres and has proven its ability to produce food for a massive population. All of these and many other dynamics are affecting us every day. We are in a truly global economy. Indeed the recent strength in the US dollar due to many global and domestic factors is keeping current hog and grain prices for US producers. For Canadian producers the opposite stronger US dollar helps their margins. The point is markets react to Global Supply and demand. We don’t live on an island!

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This post was written by Genesus