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Pork Commentary: Lean Hogs Continue Recovery

by 5m Editor
20 May 2009, at 12:22pm

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

Last Friday, the Iowa – S. Minnesota lean hog price averaged $63.89; two weeks prior it averaged $53.45. In our world that’s a gain of $20.00 per head in two weeks. It means we are losing $20.00 per hog. These are not good prices but it’s getting better. Lean hog futures still are languishing but we expect their prices will be driven by cash hogs as they continue to appreciate.

The flu story is mostly old news. There are not enough dead people to fuel the news media’s quest for a pandemic. Unfortunately, we have had pork tarnished by the initial misnaming of the H1N1 flu virus. The good thing is it appears pork demand is holding and the worse is behind us. The $20.00 per head appreciation of hogs the last couple of weeks is more than enough verification of that fact. We expect continual cash hog price appreciation in the coming weeks.

Breeding Herd

It’s our opinion that the breeding herd is still declining. Loses continue to mount. Some producers continue to run out of capital and courage. Very, very few sow barns are being contemplated. When we read a bankers synopsis of equity levels in the swine industry it tells us there will be little capital available to fund expansion now and in the next year plus. We believe the North America sow herd continues to liquidate 5 – 7,000 sows a week. There has been no market relief to stop the trend.

Early Weans and Feeder Pigs

The flu story really took it to the cash early wean and feeder pig market. Both dropped $20.00 per head in a minute, but unlike the market hog market, they have not recovered. All hog producers are struggling with losses of $20.00 per head for almost two years. This has taken about $3 billion out of our North American industry. It’s ugly and the flu hit is just one more kick we have all taken. Enough already!

Word Pork Expo

The Annual World Pork Expo will be held 3 -5 June 2009 at the Iowa State Fairgrounds in Des Moines. Thousands of producers and industry professionals from all over the world are expected to be in attendance. Visit the Genesus tent at booth #5109 East of Varied Industry Building.

Pork Exports

USA pork exports were up 2.0 per cent in March from a year ago. We have been adamant that the USA pork exports would hold this year and it was one of the major reasons we were confident that prices were on the cusp of rapid increase when we got to May this year. The flu in April has unfortunately led to pork trade restrictions from China and Russia. Pretty well every other major country is still working with us but the loss of Russia and China exports will take the edge off price appreciation. In our opinion, all pork exports will remain historically strong but not as good as they could have been.

USA Total Meat Production

The last time poultry, beef, and pork were all down year over year was 1976. The USDA released data last week projecting 2009 compared to 2008.

Meat Projection USDA 2009% of 2008 YTD 2009 Actual Projection USDA 2010% of 2009
PORK -2.6% -4.9% -.05%
CHICKEN -3.8% -6.6% +1.7%
TURKEY -7.4% -1.99% +2.1%
BEEF -0.1% -4.1% -2.0%

The USDA is conservative in their pork, beef, and chicken projections for 2009. Actual production is running significantly lower. We can’t see any way there is going to be more pork in 2009 and unless hog prices get significantly stronger soon, liquidation will continue and pork supply will be 3 – 4 per cent less next year. Ditto for poultry and beef. Loses have been huge. Producers in all meat commodities have to backfill the equity hole. Bankers and shareholders are looking for profits not market share.

The latest weekly data we have indicates that there was 10 million less pounds of all meats than the same week a year ago. Week upon week of 3,000 less trailer loads of meat is why there is still room for rapid price appreciation. People are continuing to eat meat including pork. Exports through March have remained strong.