Alberta Pork Market Report, January 17th 2019

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PED investigation continues

Tests performed at high-traffic pig sites have all shown negative results for PED, following last week’s outbreak announcement. Read more.

Board nomination deadline approaches

The nomination deadline for this year’s Alberta Pork Board of Directors is January 25. Check your inbox for the December 20 email and see the nomination form for more information.

Pricing overview

Technical weakness has devalued lean hog futures significantly over the past week following fundamental losses that were registered over the last month.

Lean hog futures for the most part have traded lower since reaching a market top on November 20th, nearly 2 months ago.  Although the market mustered some strength late in Dec and early Jan managing to stay within a few dollars of the recent high, this week’s collapse has taken spring futures nearly $10 US per cwt below the top equal to over $20 per hog Canadian beneath the once attractive spring price.

April lean hogs shown in the graph above illustrate how aggressive the move has been with mid-week trade at the lowest level seen since Aug 16th 2018.  The now 5-month low appears destined to close a gap in the April market made back in mid-August.  If successful, the April futures would need to drop another $1.25 US per cwt closing the upside gap created on Aug 16th.

June lean hogs shown below have experienced a similar fate with weakness registering a 5-month low yesterday.

A lack of fresh positive news is being blamed for the market weakness however some of the over inflated upside is simply being removed from prices.  Although ASF is a real thing and is ever more common now in Asia and parts of Europe, the North American market has yet to reap the rewards or benefits from the spread of the disease.   The most recent cases of the disease have been published through to the end November 2018 however the total impact of the disease is still to be determined.   This is not to say that demand will not pick up later in 2019 however there are no significant signs of huge import orders coming from China immediately.
For now, hog producers are encouraged to sit on the sidelines and allow the futures to “do their thing”.  With nearby Feb19 futures only a couple dollars above cash there is no opportunity now to use futures to mitigate risk.  Producers should be patient and use the next rally as a chance to add to existing positions or begin building some protection for the year ahead.

Weekly hog price recap

Regional and national cash hog values reported good strength the first half of the week, with declines Thursday and Friday pulling back on earlier reported strength. CME cash posted daily gains throughout the week, with the greatest daily gains reported late week. Wholesale pork improved overall with cutout up $0.40/cwt on higher rib, ham and belly values.

All monitored Canadian markets improved on the week, with those out of the WHE and Sig 5 up the most. The WHE 17 rose $5/hog while those out of the WHE 19 and Sig 5 were each up more than $4/hog. Pricing out of Thunder Creek and those out of Ontario rose near $3/hog, while remaining Canadian markets rose $0.50/hog. In the US, Tyson values jumped more than $8/hog while JM values were calculated $7/hog higher.

Weekly hog margins

Monitored hog margins improved on the week on stronger cash markets, despite the lower rate of exchange affecting Canadian markets. Canadian farrow-to-finish feed costs decreased $0.75/hog while those in monitored US regions increased $0.50/hog.

Hog margins out of the WHE and Ontario were up the most between $4-$5/hog. Margins out of the Sig 4 and Quebec rose near $1.50/hog. In the US, hog margins based off Tyson pricing strengthened shy of $8/hog while those out of JM improved closer to $6.50/hog.

U.S. regional margins

  • Tyson: $(17.27) USD X 1.3264 = $(22.91) CAD
  • Morrell: $(19.07) USD X 1.3538 = $(25.29) CAD
Disclaimer: Commodity Professionals Inc. presents this report as a snapshot of the market using current information available at the time of the report. These findings are for informational purposes only and should not be reproduced or transmitted by any means without permission. Commodity Professionals Inc. does not guarantee, and accepts no legal liability arising from or connected to, the accuracy, reliability, or completeness of any material contained in the publication.

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