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US Hog Margins, 1 June 2012

by 5m Editor
7 June 2012, at 9:03am

US - Margins improved significantly in the second half of May, particularly in spot Q2 and nearby Q3 periods, with deferred marketing quarters showing stronger margins as well, writes Doug Lenhart, General Manager of Genesus USA.

With the exception of the spot period, all forward margins are now at or above the 70th percentile on a long-term historical basis, providing producers with another opportunity to capture profitable margins following the fallout experienced in late winter/early spring.

Genesus Global Market Report
Prices for the week of May 28, 2012
Country Domestic price
(own currency)
US dollars
(Liveweight a lb)
USA (Iowa-Minnesota) 83.14¢ USD/lb carcass 61.52¢
Canada (Ontario) 1.57¢ CAD/kg carcass 55.18¢
Mexico (DF) 19.00 MXN/kg liveweight 60.66¢
Brazil (South Region) 1.97 BRL/kg liveweight 44.01¢
Russia 95 RUB/kg liveweight $1.30
China 13.20 RMB/kg liveweight 94.41¢
Spain 1.33 EUR/kg liveweight 75.40¢

Lower feed costs and higher hog prices have both contributed to the recent recovery in hog finishing margins. Following the release of the May WASDE report that indicated corn ending stocks above market expectations, corn has generally been under pressure although the market has stabilized recently.

A larger than expected drop in crop condition ratings this week coupled with the fact that soil moisture across the Corn Belt is the fourth driest on record going back to 1895 has raised concerns.

April USDA Cold Storage data revealed total pork inventories at 659.532 million pounds, up 8.1 per cent from March and 20.1 per cent higher than last year. It was also the second highest monthly pork inventory figure on record next to April 2008. While that might seem bearish, there are expectations that the high storage figure is in anticipation of a big export campaign over the summer.

With forward margins improving back above the 70th percentile, many producers have triggered alerts to either initiate and/or scale into additional coverage in order to capture the improved profitability.

2nd Qtr ’12 Most Recent Offering of $8.59, the low was ($1.96), the high has been $19.39 and the 5 year percentile of 67.7 per cent.

3rd Qtr ’12 Most Recent Offering of $7.76, the low was $1.20, the high has been $14.07 and the 5 year percentile of 74.3 per cent.

4th Qtr ’12 Most Recent Offering of $2.24, the low was ($1.76), the high has been $7.19 and the 5 year percentile of 74.0 per cent.

1st Qtr ’13 Most Recent Offering of $4.00, the low was $0.18, the high has been $6.04 and the 5 year percentile of 78.2 per cent.