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Cash Hogs Start to Rebound

10 October 2012, at 8:23am

CANADA - A few weeks ago US National Lean Hogs were 65 cents per pound while by the end of last week National Lean Hogs averaged almost 80 cents per pound, writes Jim Long.

A 15 cent pound pick up in two weeks or about $30 per head to the better. Meaning we are losing about $30 per head less. A real positive move, but unfortunately we still have losses of around $30 per head.

USDA Lean Pork Cut outs are running at about 85 cents per pound which indicates to us that packers are making money. When Packers make money they like to kill hogs. Over the last few weeks US hog marketing’s have been well over year over year. Fortunately the Packer demand has led to slaughter weights to be pulled down, while a few weeks US hog weights were running five pounds heavier year over year. The latest data from Iowa – Southern Minnesota indicates weekly weights 1.3 pounds lower than the same week a year ago. This is the first time year over year weights have been lower since mid-November 2011. Certainly record high feed prices have encouraged producers to lower hog weights to save money on feed but what is really positive is hogs have been pulled ahead making future hog marketing’s smaller. We expect we have seen the low hog prices for the year.

Liquidation

In the September Hogs and Pigs Report the USDA indicated that the US breeding herd had declined 74,000 in the three months since the first of June. It appears liquidation is probably ramping up more. The latest weekly sow marketing’s were (week of Sept. 22) 66,747. This is the highest weekly number yet this year. We continually are hearing of further liquidation of specific farms in US – Canada. We expect by the end of the year US – Canada breeding herd will be 200,000 – 250, 000 smaller than June 1st. The huge financial losses incurring in the business are extremely real. One consequence is there will be lots of empty finishers in 2013 as several million pigs disappeared out of production from herd liquidation.

Other Observations

Canadian cattle industry is reeling with the E – Coli break at XL Packers – Canada’s largest beef plant. Country wide, beef demand is down. This is backing up cattle in feed lots. It is a good reminder that pork continues to be the safest meat.

Interesting how South – East producers like Prestage Farms are figuring out how to bring ships of grain from Brazil rather than the US Mid-West as it is cheaper. We’ve got to figure the rest of the world can do the same arithmetic. This is another consequence of the US drought. Other countries will develop relationships with importing countries. Commodities are commodities, price is key. We expect high grain prices will lead to the largest acreage ever planted globally in 2013.

US corn price September 2011 averaged $6.38 a bushel - hogs in the 90’s lean softened the blow. Adage: Doesn’t matter what the feed price is, it’s the relationship to the hog price that really matters.

Summary

Hog prices have rebounded, $30 per head better. Sow herd liquidation continues as financial losses of $30 per head devastate our industry. Fewer pigs in 2013 will lead to record hog prices. High grain prices will lead to global record acreage in 2013. The right weather + record acreage = lower grain prices. Fewer hogs = greater profits. The challenge is to get there.