Pork Commentary

Jim Long President – CEO Genesus Inc.

May 21, 2013

US Cash Hogs Continue to Push Higher

The relentless push to higher cash hogs continues.  Last week National lean hogs moved 3¢/lb. higher a further jump of $6.00 per head week over week. US Cash hogs are now $24.00 per head higher than a year ago.  The average farrow to finish producer has gone from losing $35 per head six weeks ago to break even or better.  The sucking sound of producer equity drain has stopped.  It’s not good breaking even but it’s a lot better than an industry going backwards.  $80 million a week as it was in March. Hog numbers we sense are tight.  Average National hog weights are 3.5 lbs. lighter than a year ago.  It is estimated Packer Margins are minus $12 per head, (does not include Packer margin on processing and exports). It’s not a good time to be a Packer.  They are paying more for hogs because they have to in order to maintain market share and pork orders.  Packers don’t deliberately lose money or partake in acts of charity.  They are paying more because they have to. We continue to believe that the combination of seasonality of hog supply coupled with the liquidation of the breeding herd that happened beginning last July is continuing to fuel hog prices higher.  Last week there were individual lots of lean hogs over $1.00 lean per lb.  We expect lean hogs will push higher as the reality of lesser supply happens week upon week. We expect the hog market will be fuelled by cash hogs not the expectations created by lean hog futures.  There is too much skepticism in the psychology of the market for futures to lead the market move.  What we mean is that too many pundits are still expecting more hogs than last year.  The only reality we believe will be fewer hogs.  Less supply means higher prices.  Lean hogs are now higher than a year ago. Corn Corn futures fell last week to $5.20 for December futures.  Planting moved ahead.  The talk of drought has been replaced by wringing of hands about too much moisture.  The old saying “rain makes grain” seems to be leading grain prices lower. VIV Russia WE are on our way to Moscow to attend and participate in the livestock trade show VIV Moscow.  Next week we will report our observations on the Russia Hog Market.  It’s a big export market and the issue with Paylean is what we will be asking about.  

Commentary by Jim Long, President-CEO Genesus Inc. on www.swineweb.com and www.genesus.com

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