26 July 2022

4 minute read

By: Jim Long

North America

• U.S. National Price – $1.18 lb. carcass.
• China 22.73 RMB/kg = $1.52 U.S. liveweight a lb. x 280 lb. pig = $425. Current China isowean $98.
• Spain – highest price in their history at 1.68 Euros/kg liveweight up from 1.02 Euros/kg at the end of January = increase of over $120 per head.
• U.S. – China – Spain all hitting high prices at the same time is a reflection of the global decline in hog production.

Other Observations

• China’s official inventory data indicates little or no liquidation. The price going from 85¢ lb. at the end of March to $1.52 lb. last week tells us there has been a huge collapse in production due to the financial losses in the billions. No one pays more than they have to.
• EU data shows Pork Production down 7% in the latest month’s report – EU officials predicted 3%. We believe the EU has liquidated about 10% of their sow herd.
• U.S. pork carcass cut-outs closed Friday at $125.74 lb. A sign of strong pork demand. Choice Beef carcass cut-outs are $2.68 lb. a reminder consumers will pay more for a better taste experience. Someday our industry will realize the holy grail of profitability is better tasting pork not some other production myths.
• The U.S. National price of $1.18 a lb. compares to $1.11 a lb. a year ago.
• September corn closed Friday at $5.64 a bushel. In mid-May, September reached $7.78 a bushel. U.S. National avg cash corn closed Friday at $6.50 a bushel. In mid-June, it was $8.00. Certainly, lower prices are positive for swine producers’ cost of production. Since mid-May, the feed cost to finish a market hog compared to current has declined by $20 per head. A significant amount.
• Last Friday a Turkish-brokered deal was made with Russia and Ukraine to allow grain (wheat, corn, oilseeds) to be shipped from Black Sea ports. If successful this will put millions of tonnes of grain into world markets. Not only from Ukraine but it will facilitate Russian grain – fertilizer exports. Wheat dropped 47¢ a bushel on the news of the agreement. Wheat has declined $5.00 a bushel since mid-May. $12.68 to $7.59 last Friday. The lower wheat price helps Europe swine feed prices where wheat is used significantly more than in North America.
• About a month ago 500-550 lb. U.S. sows were 50¢ lb. last week they averaged 70.2¢ lb. with highs of 83¢ lb. Sow slaughter the last few weeks has averaged over 60,000 head (other than July holiday week). Price hasn’t jumped from lack of sows in our opinion but demand.
• PigCHAMP quarterly 2022 data from 273 farms indicates sow mortality continues to be high. Mean of 14.83%. The top 10% was 23.3%.
  • In 2017 the mean was 10.73%. The top 10% was 15.5%.
  • Seems the continued use of sows with leg, social, and prolapse issues is continuing to lead to higher sow attrition. It’s a real cost when SMS – MetaFarms data indicates a dead sow has over a $1,000 per head loss. Farmer Arithmetic – sow mortality up 4%, 6 million sow inventory. An extra 240,000 dead sows a year in industry. Dead sows don’t produce pigs.
• Last week’s report had Iowa-S. Minnesota weights at 277.5 lbs. compared to 278.1 lbs. a year ago. For the first time in several months weights lower year over year. Tells us market hog sales are very current.

Premise

U.S. – China – Europe down in production at same time has been our prediction. It appears this is correct. This will sustain strong hog prices.

U.S. inventory report in June indicated fewer pigs and sows than a year ago. That is our production until next summer. We believe at minimum prices the next twelve months will be the same as the last twelve months. Current Lean hog futures at a $1.00 next spring and summer are undervalued in our opinion. We currently have a $1.18 national lean hog price average, why would it be any lower next year with less hogs in America, less hogs in China, less hogs in Europe? Its Farmer Arithmetic but we will bet it against the Algorithms.