Jim Long President – CEO Genesus Inc.
firstname.lastname@example.org September 15, 2014
Record Corn and Soybean YieldsThe pork sector got some news on Thursday that will almost guarantee lower feed costs over the next twelve months (compared to the last few years). The USDA on Thursday came out with estimates of record corn and soybean yields and production.
|YIELD (Bushels Per Acre)||TOTAL PRODUCTION (Million Bushels)|
PEDLast week it was announced that PED had struck Circle 4 in Utah, probably the largest single site hog operation in the US with over 70,000 sows farrow to finish. Below you will see a graph from the American Association of Swine Veterinarians indicating reported PED breaks. Certainly down from the peak last winter but more than a year ago. Question is with the Government insisting on mandatory reporting is that leading to more or less reports? If PED rampages this coming winter like last year, next summer lean hog futures are way undervalued. We would expect $1.30 lean hogs if PED hits with similar intensity. Two main reasons pork supply will be tempered from PED and we expect China due to its 4 million sow liquidation (60 million less hogs?) will be big pork buyers. A reflection of supply and demand of pigs is the cash sow and feeder pig markets. Cash sews last week averaged $60.57 up $2.00 from the week before. Cash feeder pigs 40 pounds averaged $79.95. DTN – Agdayta does a daily calculation of what you pay for feeder pigs, last Friday it was $85.26. We suspect cash sews and feeder pigs will have a $10 increase per head in the next four weeks as the market starts chasing supply.
SummaryWe will have lots of corn – soybeans. Feed prices will be low relative to the last few years. We see little sow herd expansion and if PED unleashes the hell like this year, summer futures are way, way undervalued. In our opinion, even without PED next summer lean hogs will be over $1.00 as in our opinion, China will be a big buyer of pork next year. China’s market is already starting to move up. On the first of July China’s hog price was 97₵ US liveweight equivalency a pound. Now it’s $1.10. The US hog price is now 40¢ a pound lower than China’s and will start pushing pork to China. In our opinion, we are just at the beginning in China’s expected production freefall.
Categorised in: Pork Commentary
This post was written by Genesus