Corn Hits Life of Contract Lows
Our observations from last week:
- Last Friday, December Corn went to new of lifetime lows at $4.27 a bushel. December is a heck of a lot lower than mid-June when it was $5.25. Remember the idea it was so wet in the fields the corn crop would be poor? It’s now $1.50 a bushel less than at that time. Wonder how many corn farmers sold $5.25 corn?
- Not only has December Corn come down significantly, so has cash corn. Las week the average National Corn Price was $4.07 a bushel. Corn in North Dakota and Minnesota was $3.67 a bushel. Cost of Production at Farrow to Finish has declined at least $30 per head since July.
- US weekly hog marketings continue to run significantly below a year ago. Last week US Marketings were 2.272 million a year ago same week 2.359 million. Almost 4% fewer.
- We are in a Continental Market – Pork moves freely between USA and Canada. The total Hog marketings of the two countries are a true reflection of supply.
USA-Canada have marketed approximately 1.7 million fewer hogs so far this year compared to last. Where are the “Chicken Little Economists” now – that were telling us there was expansion? Simple arithmetic – you didn’t have expansion with fewer hogs coming to market.
- Small Pigs from Canada to USA are also down. Year to date 3.373 million down 12% from a year ago. Heaper feed and strong demand is the reason cash feeder pigs at $70 plus dollars are $30 per pig higher than a year ago. We expect cash feeder pigs will reach $100 per head.
- US Cattle on Feed Report for October 1st indicated 8% fewer head on feed than a year ago. Over 800,000 less. Going forward lower beef production will be rocket fuel to keep hog prices strong.
- We don’t think any significant sow herd expansion has happened as of yet. We are aware of many potential sow barns being restarted and few new barns talked about. As of this moment mostly talk with no gilts gone into any of them.
- We have reports some banks squeezing operating lines now that hog cash flow is positive. They want to cut exposure. The cutting of operating lines will add expansion.
- Looks like the “grow your own feed and put manure on ground and have hogs” still works. The hog producer who has grown corn etc. during the high feed price time, cash flowed well as a whole enterprise. Now high hog prices and cheaper corn etc., the model still works. Whole farm income that is positive is a sustainable business model.
- On the not sure why it matters to anyone else front. The PIC purchase of Genetiporc is playing out as expected. Several Genetiporc people were terminated last week. PIC’s statement to their shareholders that they would capture $11 million in synergies from the purchase can lead to no other scenario. Cut management, administration, genetics, sales, logistics, the arithmetic is such. Cruel world. Many let go had spent many years as an integral part of building Genetiporc into a major genetic player. There thank-you is termination and severance.
Summary
Lean Hog Prices remain seasonally strong, feed prices have plunged. Cattle Supply in major decline. We believe no significant sow herd expansion has started. Profits will be good through next summer.
Categorised in: Pork Commentary
This post was written by Genesus