Jim Long President – CEO Genesus Inc.
September 23, 2013
Lean Hog Prices Continue Historically Strong
It’s almost October and last week the National Lean Hog Price 53-54% hit 96.82¢/lb. Unprecedented for this time of year. A year ago last week the 53-54% National lean was 68.07¢/lb. That’s $60 per head difference. The cheques sure are bigger. Seems as the price goes up we become smarter business people. It’s good to be on the right side of the deal. Of course as an industry we probably have only made money for maybe the last three months after months of losses. Not exactly break-out the champagne time yet, but as my father used to say “it takes money to buy whiskey!” Funny thing with that saying he wasn’t a drinker, not sure where he got that quote?
Last week the US marketed a whopping 9.2% fewer hogs that the same week a year ago, almost 200,000 head less! The fifth consecutive week of sharply lower market hog numbers. This has pushed USDA pork cut-outs to $1.00/lb. The price of pork is extremely high for this time of year.
It just doesn’t end with market hogs. Last week USDA estimated 450-500 lb. sows were running about 78¢/lb. A year ago same week they were 35¢/lb. A 500 lb. sow is over $200 per head higher than a year ago. A 500 lb. sow is bringing almost $400. Never a better time to replace old sows with a gilt.
USDA Cash early weans average last week were $42. A year ago $8.00! 40lb. feeder pigs last week $59.93, a year ago $18.
Domestic demand for pork remains strong with beef at the retail level, the highest in history. Pork Export demand is also strong. WE expect Pork in storage is probably declining due to the high value of pork. Less supply from lower hog marketing’s, strong domestic and export demand with the competing red meat beef at its highest retail price in history. Any wonder lean hogs are unprecedentedly strong.
We have believed and written for months that the economics of losses of $40 per head would cut hog production. It has. Who would hang on to hogs at 96¢/lb. lean so close to October? The Hogs are not backed up! The US, Canada and the world hog production has been cut by high feed costs and financial losses. Financial losses will and always will cut supply of any commodity. Hogs are no exception. The idea that months upon months of losses of 100’s of millions of dollars weekly domestically and globally would not cut production was and is ridiculous.
Some people have wondered if PED has cut the market hog numbers we are seeing. We don’t think so. PED hit in May-June. It hit the farrowing barns the hardest. The mortality that happened hasn’t reached market weight, that won’t come until November-December. If hog numbers stay down and the whammy of PED hits, the potential price of lean hogs in December could be mind boggling. $1.00 lean in December? Unthinkable maybe? Maybe not?
A year ago US Corn was almost $8.00 a bushel. December closed Friday at $4.51, just a hair over life of contract lows. Feed is getting cheaper. Corn last week in Rondonopolis, Brazil was $2.62 USD/bushel. Got to believe the world importers of corn can do the arithmetic. Corn is truly a commodity, the buyers will chase the lowest price if it can be logistically supplied.
We might be crazy but we see strong demand and fewer hogs year over year for the next ten months. We expect lean hogs will average over 90¢/lb. lean in that time frame. Time to backfill the equity hole.
FEEDSTUFFSLast week we got an email from an owner of the major pork powerhouse asking our company not to advertise in the trade magazine Feedstuffs. The reason being that Feedstuffs placed advertising from the HSUS (Humane Society of the United States). We see his point Feedstuffs is a weekly newsletter with advertising for the feed, livestock and poultry industry. To profit from taking advertising from an organization whose main goal it appears to change livestock and poultry production and we know it and move to a vegan society borders on opportunistic and insensitive. We are a subscriber of Feedstuffs and have noticed an editorial. We have wondered over the last few months if they know who the hands that feed them are. We suggest that all advertisers ask Feedstuffs “Why they accepted advertising from HSUS? What’s their policy for the future?” If there are unsatisfactory answers it should be check book penalties.
Categorised in: Pork Commentary
This post was written by Genesus