Tough Week for Hog ProducersThis past week saw May corn close at $7.54 a bushel, meanwhile in the last 10 days lean hogs dropped from $1.02 lean per pound to a 95.225 cents close Friday wiping a potential $15.00 per head off margins. That is a nasty move down. Average U.S.A. 53 – 54% lean hogs were $95.15 while U.S.D.A. carcass cut outs were $93.31 per pound. Packers are working for nothing or less. It will be really hard to push lean hogs higher without carcass cut outs moving up. Packers will work for nothing (they are almost like us farmers) but we doubt they will bid for any length of time for live hogs at a price higher than carcass cut outs.
- A while ago U.S. packers were making over $30 per head. Now they could be losing money it’s the old supply and demand. When packers were making $30 per head there was around 2.3 million hogs per week now it’s 2 million per week. With fewer hogs to chase packers are bidding up.
- One factor which could be helping packer margins is on export sales which we understand are not in the U.S.D.A. cut out calculation. With about 25% of U.S. pork being exported we expect export margins are better than domestic and this is helping fuel packer demand and allowing them to better their financial picture.
- Corn planting is slow with wet weather delaying planting pushing corn prices higher $4.00 a bushel higher than a year ago. With a hog to corn ration 12.5 to 1 there is little profit potential for producers who buy feed. For producers who grow their feed it’s never been much better.
- Last week Cargill announced they had purchased Smithfield Foods Dalhart Texas empty swine operation for $32 million. The site we understand has a capacity for 35,000 plus sows. We find this interesting as it is the first major move for an increased breeding herd in the U.S.A. in the last three years. Cargill as one of the world’s largest privately owned companies is showing in our mind a very positive faith in the future of the U.S. pork industry. Cargill is everywhere in the world and has shown they are adept at investing anywhere. The decision for Cargill to invest in Dalhart and America makes us believe as a very smart company they see a future in the U.S. swine industry, and as one of major global grain traders a strong future for competitive meat protein production despite high grain prices.
|YEAR||BREEDING HERD||BOARS 6 MONTHS AND OVER||ALL OTHER HOGS|
- Currently Eastern Canada (Ontario – Quebec) has 740,000 breeding animals (2005 898,000) while Western Canada (Manitoba, Saskatchewan, Alberta) have 567,000 breeding animals (2005 737,000). At one time there was a belief the west would surpass the east in swine production due to the abundant grain and land available. It hasn’t happened and it appears probably never will.
|2010||2011||2011 AS PERCENTAGE OF 2010|
|KEPT FOR BREEDING||7074||7096||100|
Categorised in: Pork Commentary
This post was written by Genesus