Jim Long President – CEO Genesus Inc.
March 2, 2015
Hog Market Shows a Pulse!
Last week the Cash Hog Market showed a pulse! The 53 – 54% lean hog price increased 4¢ or $8.00 a head Thursday to Thursday. Finally, the market price had an increase after what seemed like weeks upon weeks of decline. Lean hog futures have seen a similar trend gaining 5¢ per pound over the last couple of weeks. The settlement a week ago Friday of the West Coast port labor slowdown has given and will give hope that US pork will start flowing at higher levels to Asia. We expect the price of cash hogs and lean futures, have both been enhanced by the Port labor resolution. The North American Meat Institute has estimated the strike could have cost $85 million a week to meat and poultry industries. National Pork Producers Council CEO Neil Dierks had said in a mid-February interview with the National Hog Farmer that once a deal is reached that it would take 45 to 60 days to get operations back to normal. Dierks says he had learned that normally about 30 containers per hour, per crane would be loaded, while during the slowdown only about 17 containers per hour were being loaded per crane in operation. Seems to us that is half speed. It definitely backed up pork and/or pushed more pork, beef, and chicken into the US, Canada, and Mexico market. Getting ports going will certainly help hog prices. Current China liveweight hog prices are 92¢ USD per pound. The current US price is 48¢/lb. That’s $100 per head difference. We are betting that Smithfield Foods owned by China’s WH Group will figure out as well as many other marketers that a $100 per head market spread allows for margin opportunities. The port strike settlement is a key piece to way more pork to supply Chinese needs. We see strong US cash market upside in the coming weeks and still believe that US lean hogs will reach $1.00 USD lean per pound. To put it in perspective, 100,000 head carcass equivalent export to China is less than 1% of China’s weekly hog production. 100,000 a head increase would take US domestic consumption availability to levels similar to last summer’s PED influenced supply.
Hog Weight DeclineIt appears that market hog weights have declined a couple of pounds. Why?
- Hog margins are being squeezed. Many farrow to finish operations around breakeven
- Less Paylean being used as more packers gear up for China market access – this cuts growth?
- More hogs going to market squeezes finish space
- If we have learned anything from PED is that less pork a real strong relationship to hog prices. Cutting hog weight will make less pork available over time.
SummaryPork strike settled – which will enhance exports. Lean hog prices increasing, as hog supply seasonally declines, coupled with beef prices through the roof will contribute to lean hog prices being higher.
Categorised in: Pork Commentary
This post was written by Genesus