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Pork Commentary: Light at the End of the Tunnel

by 5m Editor
28 November 2007, at 11:48am

CANADA - This weeks North American Pork Commentary from Jim Long.

Light at the end of the tunnel? We hope so. Last week we saw positives in the market.

  • The Iowa-Minnesota lean price last Friday was 49.07, up $4.00 from a week ago ($8.00 per head).
  • USDA lean cut-outs were up to 59.10 at the end of the week. It’s amazing that the pork market is holding together as well as it is with so many hogs being produced.
  • We are confident hogs have been pulled ahead. Iowa-Minnesota weights tell the story.
Iowa-Minnesota
Nov 14 268.2 lbs
Nov 7 268.8 lbs
Oct 31 269.7 lbs

In the last 2 weeks, a drop of 1.7 lbs. This only happens at this time of year if we are killing them faster than they are ready. We will have smaller weekly marketings soon.

  • Demand for pork is strong enough that Smithfield (John Morrell) slaughtered on Sunday. We do not know the circumstances, but you have to believe they have the pork sold to pay that overtime.
  • It appears the feeder pig/early wean market is getting stronger. Prices have bottomed and are moving up with average spot cash early weans 25.76 and feeder pigs 34.45.
  • Reports out of Europe tell us that producers are losing money and there is liquidation underway. High feed costs and a Euro at a record value compared to the U.S. dollar puts European pork exports at a huge price disadvantage.
  • Lean hog futures show a steady uptrend. Friday close – Dec 55.60, Feb 62.82, April 66.72. December is $10.00 a head better than last week. February $28.00 a head better. April $34.00 a head better. The low has been hit and we expect stronger prices from here on.

Russia – Minister of Agriculture

This week, we will be at a meeting with Aleksey Gordeyev, the Russian Minister of Agriculture. It will be interesting to get a perspective on Russia’s plans to double pork production in the next four years. It is a global market.

Big Picture from Big Sky

Florian Possberg is CEO of Big Sky a 50,000 sow system in the Province of Saskatchewan. Mr. Possberg spoke at the Saskatchewan Pork Symposium and made the bold prediction that Canadian hogs will be $2.40 per kg (U.S. over $1.00 lean per lb) in May of 2008 (18 months). Possberg believes livestock prices will eventually rise to a new plateau to match the increase in grain prices.

Sounds like good news, but it is 18 months away and the only way it will happen is if pork and other meat supplies decline.

Right now, our industry is losing upwards of $100 million per week cash. Barns are losing value in some geographic areas. The equity loss is huge. It is a cyclical business and we are at the bottom. The only way to go is up.

5m Editor