Jim Long, President and CEO Genesus Genetics
The lean hog futures are certainly moving up and down. The whole pork world is focused on China. Now reports of specific export orders to China are what much of the future traders are following like sheep. Not that sheep are bad.
The real plus in U.S., lean hogs are trading in the low 80’s a lb. – this puts producers in a profitable position.
Of note, despite gyrations in the lean hog futures the future profit picture for the next year using the current lean hog futures, futures corn, and futures soybean meal indicates profits in the $50 U.S. per head range. If this comes to fruition probably the best 12 months in the U.S. pork industry future. We expect most if not all countries will set new records for hog prices.
The Bloom has come off packer gross margins. Not too long ago the difference between the U.S.D.A Pork Cut-outs and the lean hog prices were over 15₵ lb. Last Friday Pork Cut-outs were $82.01 lb. and CME lean hogs were $83.02 lb. Certainly the pendulum has swung in the producers favour.
The extra packer capacity that has opened up over the last few months is really showing. Competition for hogs to fill shackle space has got intense. We expect Packers Gross Margins to be small over the coming months. Packer Margins are never great when hog prices are high, which they will be.
We expect strong Packers who have made good money over the last few years, will use resources to hold market share, food service contracts, exports and retail shelf space. Hog producers will benefit.
We expect producers that have ownership in packing shackles and sell their hogs at an equation of Pork Cut-outs, or plant profitability will get less money for their hogs in the coming months than producers who are selling their hogs on a more cash basis.
Next two weeks:
The Next two weeks we will be in the Philippines and China.
As I write this, about to land in Manila Philippines, later in this week will head to China. We will make our observations in coming commentaries on what we learn and hear.
Interesting times. The global Pork Industry is interconnected like never before. Livelihoods depend on so many factors, both domestic and global