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Jim Long Pork Commentary: March USDA Hogs and Pigs report

No real surprises in the March USDA Hogs and Pigs report.

3 April 2019, at 3:44pm

The breeding herd has been running about two percent more year over year for a few reports so you could expect two percent more pigs coming from that.

  • December - February litter size 10.7 up one percent from a year ago (10.58).
  • December - February sows farrowing 3,084 up two percent from a year ago (3,034).
  • Everything seems to be two percent?
  • Since last June the US breeding herd has increased 29,000 or less than ½ of one percent (6,320-6,349). A reflection in our opinion to the challenge of pig production profitability over that time frame.

Other Observations

US lean hog prices 53-54 percent, have jumped considerably in the last four weeks, going from 51.85₵ lb. to 73.47₵. A jump of over $45 a head. Went from losing money to making money. It wasn’t any time soon enough.

A year ago, 53-54 percent lean hogs were 57.80₵ lb now 73.47₵ lb. For many weeks we were below year-ago prices by a considerable amount, now the pendulum has swung.

Lean hog futures have been on a wild ride. Going rapidly up, then a quick fall. A Future trader's dream, lots of trades, lots of fees ie, Friday - June futures gyrated in a 5₵ window. It took the future market 6 months to realise China will have an unprecedented pork shortfall. So much for market intelligence. In our opinion hog prices will continue to rise. As my old friend Doug Maus used to say “Chicago! Las Vegas with no rules”.

China

Wall Street Journal Article - ASF Article - Jacob Bunge – March 27, 2019

“Chinese Pig Farmers have culled at least 10 million pigs to stop the spread of the disease, according to the most recent estimate from the market-data firm INTL FCSTONE, and hog production is running roughly 30 percent below last year’s levels. That could mean China’s production falling by over 200 million hogs this year from 710 million last year according to the US Department of Agriculture”.

200 million fewer hogs! That’s more than the combined production of the 2nd and 3rd largest hog producing countries: USA (127 million); Spain (50 million).

In 2014 the US and Europe had their highest prices ever, mostly triggered by the PED outbreak in the USA that lead to the loss of 7-8 million pigs. Now USDA speculating 200 million in China? ASF is now in Viet Nam - if it acts like China, there could be a reduction of 10 million more market hogs a year.

Let’s say 200 million less market hogs if USDA correct. That’s about 65 million tonnes of feed not needed. That’s corn not needed; two billion bushels? Soymeal? Canola? It’s like USA hog industry disappeared. China is near self-sufficiency for corn, do they export? Not exactly bullish grains or oilseeds is it?

China Hog Prices March 30
China Hog Prices March 30

Certainly can see location matters in China. $70 US per head difference from low to high. We expect China's average price will continue to rise probably exceeding $1.30 US a lb at some point.