Amazing what happened in the last week.
The U.S. March 1 Hogs and Pigs Report released Thursday March 28 showed an increase of 2% in U.S. breeding and market inventory. Not exactly bullish.
So What happened since then i.e. June Lean Hog Friday, March 29 were 88.550. One week later last Friday April 5 they closed at 98.975 – 10₵ a lb lean higher – $20+ more per head. October lean hog future March 29 80.92. April 5 91.15 = $20 per head. This trend is across the board.
In our opinion what has happened is that normal U.S. domestic – export supply demand equations are being trumped by the China ASF story. All bets are off where the hog-pork market is going.
One thing for certain is the rapid change in producer attitude.Four weeks ago most were grumpy and they had a right to be. They had been losing money and were losing money. 53-54% lean hogs the first week of March were 54.13, a good $20 a head under cost of production. Lean Futures were low and there was little optimism.
Fast forward four weeks to last Friday 53-54% lean hogs were 77.54 up 23 or over $45 per head.
Not sure but we expect the fastest Hog Price rise over 4 weeks ever. The industry has gone from losing $20 to making $20 plus.
We can see it selling gilts.
It’s not that producers have got rich the last two weeks but now they see a brighter future. Lean Hog Futures and Grain Futures now reflect profits in the $45-50 per head range for the next 15 months.
It’s never looked brighter?
Now producers once weary of the future having the capital and courage to purchase gilts. Filling holes not expanding- culling old sows (also at higher value).
Higher hog prices are usually not good for Gross Packer Margins-
Last Friday U.S.D.A. Pork Cut-outs were $81.84. Lean hogs 77₵ = a 5₵ spread is no fun for packers.
For lean hog price to go up much more Pork Cut-outs need to rise. Increased Packer Capacity will not be conducive for Gross Packer Margin as hog numbers decline seasonally.