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Cash Lean Hog Market Continues to Go Sideways

7 March 2012, at 9:21am

US - The cash lean hog market continues to go sideways with the US National lean hog price hovering around 85 cents. We’ve got about 60 days before the higher markets expected in the spring come to fruition with May – August lean hog futures averaging close to $1.10 lean per pound. The $30.00 per head boost in prices will go a long way to give strong profits for the four month period, writes Jim Long.

Cash feeder pigs continue to reflect potential profits this summer with an average last week of $86.27 for 40 pounds. Today’s 40 pounders are currently a July marketed hog. We expect feeder pigs to stay strong for the next several weeks.

Sow Herd Expansion

We believe that the US breeding herd has started to expand. Sow marketing’s are down with weekly numbers now below 60,000. We also sense an increase in sow numbers in many sow units. A cautious optimism is leading to this increase. Let’s hope pork exports stay strong. A leading packer executive several years ago called pork exports ‘The opiate of the American Pork Industry.’

Corn Markets

The USDA a week ago predicted $5.00 per bushel for corn and 94 million acres planted for the 2012/2013 crop year. The futures market doesn’t seem to be buying into this outlook with futures well over $6.00 per bushel for most months going forward. Let’s hope the USDA is correct, not the futures traders.

PRRS

The PRRS saga tearing across North America continues. Filtered sow barns are failing, filtered A.I studs, and bio secure sites going down, etc… It is really sad all of the devastation. We expect the number of hogs that will come to market this summer will be less and a price mover. The almost non - existent winter that we have had this year in all likelihood has made the PRRS spread easier. Wet, mild, and humid compared to a killing cold – a cursed disease!

USDA Outlook Forum

Donnie Smith President and CEO of Tyson was a guest speaker at the USDA outlook luncheon. Some of his comments were reported by Chris Clayton – DTN Ag Policy Editor. Tyson is the world’s largest meat producer. Packers such as Tyson are moving less volume of pork and beef right now, but dollar sales are up overall because of price inflation, Smith said. “All I am trying to say by the price inflation comment is the interest is there. If people had the money they would spend it on meat. The only reason they aren’t buying meat is they can’t afford it.“

“People want meat in their diet and I don’t blame them. I do too, but it’s getting pretty expensive. We’re concerned there are thresholds, and it depends on disposable income, where demand kind of tops it.“

He added “Per capita consumption, I think, will drop for the next two years. The current trend we have, I don’t see changing that for the next two years.“

The USDA expects 198 pounds red meat – poultry per capita in 2012. This is down six pounds from 2011.

While per capita consumption is expected to decline in the US, Smith said the outlook for protein exports remain strong. Smith cited a weak dollar and comments from the US Federal Reserve that interest rates are expected to remain unchanged through 2014.

“We should have a favorable environment for exports and that’s good for the economy.“ Smith said.

The outlook that Smith gave makes sense. The world will be buying US meat and poultry in 2012. Companies like Tyson, Smithfield, JBS, Swift, Hormel, Seaboard, Maple Leaf, etc… are the point men for our pork exports. They need to know the domestic and world markets and they do. It’s a great strength.