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Pork Commentary: Lean hog prices are languishing

by 5m Editor
11 July 2007, at 10:32am

US - Iowa-Minnesota’s lean price last Friday was 68.59. Profitable prices, but not near the levels one would suspect at this time of year, writes Jim Long in this week's commentary.

Only two weeks ago prices reached 80¢ lean and have since plummeted. Packers are not getting rich either, with the pork cut-out averaging 72.31 last Thursday. A spread of less than 4¢.

Other observations:

  • Slaughter continues to run above a year ago last week, up 1.8% year over year. More hogs are putting increasing pressure on prices.

  • It appears the circo-virus vaccine is helping get more hogs to market. Before the vaccine, mortality was higher overall in the industry. Heck, we do not know if it’s adding 1% to the overall market numbers, but it would probably be a good guess.

  • Languishing slaughter prices and the impact of higher feed prices is kicking the crap out of spot feeder and early wean prices. Spot feeder pig prices are in the 30’s and early weans in the teens. No one can produce either at those prices. Suspect pigs with less than ideal health and genetics are finding the floor of the market. Buyers are able to pick and choose their sources. In the old adage ‘who’s calling who’ pig sellers are burning up the phone lines. Historically, feeder pig prices bottom at the end of July and then begin to rise into the fall. We expect the same pattern this year. The current pricing collapse will probably scare away some contemplated breeding herd expansion.

  • We are hearing unsubstantiated rumours that a Western Canadian packer is lowering their price point for purchasing market hogs by $10-12 per head. The Canadian packer (and production industry is under siege with the Canadian dollar near par with the US dollar. It has been reported that the same Canadian packer has been losing one million dollars a week for the last three years. As a friend says “No one goes broke if they can help it. It doesn’t take a leap of faith to believe a packer dropping purchase prices to stop the sea of red. Unfortunately a $10-12 lower price for hogs for producers is really damaging and, in turn, affects their viability to supply.

    25 pigs continues to be a benchmark of excellence that few achieve. Even more extraordinary is the achievement of 30 pigs by WOODLAND, a Genesus customer.
  • We expect a continued increase of pigs and hogs from Canada to the US. Lowering slaughter hog prices in Canada will continue to push hogs there. We expect the Canadian July 1st breeding inventory and market hog inventory to show a decrease. We would not be surprised if the aggregate Canadian and US breeding inventory would show no increase year over year.

  • Grain prices will, in our opinion, stay reasonable. There will be no $5 bushel corn. The US corn plantings and the world’s increases will keep prices from reaching a lunacy level. Producers who are growing their own feed seem to be relatively comfortable with the present market conditions. Those buying feed continue to be nervous.

  • High feed prices and breakevens seem to be causing further consolidation in the industry. IT appears that there is a major shake up coming in the swine genetic industry, with one of the major players on the market. We expect further rationalization, as the continued necessary investment in research and development separates the haves and have-nots of genetics. We have never seen, in our time in this business, such a disparity between genetics productivity capabilities. As profitability issues arise, some genetic companies will find out that they are ‘dead men walking.’ No one will be able to afford their genetic shortfalls. Just make sure you do your homework. For your own sake, do not be caught driving a Model T.

    We maybe sound a little sour about the market. We are nervous. Supply seems to keep coming and coming. There appears to be creeping expansion of the US breeding herd. Pork export increases have stalled. Its time to be prudent. October futures were 64.75 last Friday. We believe that might be a dream when there are 2.1 million a week kills. There appears to be more chicken and beef coming. More meat. It will not be a price disaster, but we sense tough times are ahead. Push your productivity and lower your costs if you can’t control the market.

Latest SMS Data Calendar Year 2006

The latest Swine Management Service Benchmark (SMS) Data (Freemont, Nebraska) proves once again Genesus’ industry leading results. The SMS data base for the 12 months ending December 31 has a total of 380 farms and 722,417 females. In the last twelve months Genesus has 8 the TOP 9 farms in pigs weaned/ mated female/year (out of 380 farms). In the quarter ending December 31 Genesus has 6 of the TOP 9 farms in pigs weaned/mated female/year, and the first farm ever to exceed 30 pigs weaned per sow. Every major swine genetic company has numerous herds in the SMS database.

52 Week Performance ranked by Pigs weaned/Mated female/Year December 31, 2006 –

Pigs weaned/mated
female/year
Genuses
Number of farms: 30
SMS
Number of farms: 380
TOP 10% 29.46 27.29
TOP 25% 28.90 26.84
Average All 26.41 22.68
These facts confirm the obvious, Genesus out performs all other swine genetics. Ask yourself, are other genetic choices limiting your production?


5m Editor