Pork Commentary, September 11th 2017
Jim Long President-CEO Genesus Inc.
US Lean Hog Prices have rapid decline
A month ago US 53-54% lean hog were 84c lb; last Thursday they were 67c lb. A drop of 17c or about $35 per head. Amazing what a few more hogs coming to the market and expectations of even lower prices can do to returns.
A year ago 53-54% lean logs were 63c lb. We expect the hog price to decline over the next few weeks with hogs getting to low 50’s
The salvation could be the ramping up of the new Coldwater and Sioux City plants with an extra capacity potential of 30,000 heads a day this fall, that could put extra competition for hogs in play. With pork cut-outs at 83c lb last week, packers’ gross margins remain strong. This indicates continued good pork demand. Also packers’ margins will encourage aggressive packer hog procurement. Nothing like making money to encourage maximum activity.
Cash Corn in North Dakota, Minnesota is $2.67 a bushel ($ 105US/tone). Other areas are higher but $2.67 is a reflection of the amount of corn available and demand. U.S. feed prices should stay relatively low for the foreseeable future.
U.S. January to July sow slaughter is 712,000; same time a year ago 648,000. That’s 64,000 more this year to date. We sure wonder how much sow herd is expanding, given the increased sow slaughter first 7 months of the year. Of note, last December breeding herd was 6,090 million; on June 1st, 6 months later 6,069 million. A decrease of 21,000
Genesus sells breeding stock. Its our job to search out new sites to sell producers gilts. In our observations there is not significant new sites under construction. Probably 40,000 sows this year and would suspect at least that many sows go out of production somewhere else. The June Hog and Pig Report showed absolutely no breeding herd expansion from March to June. It will be interesting what September brings; we expect little change from June’s inventory.
The U.S. dollar index, a bundle index of foreign currency relative to the U.S. dollar closed Friday at 91.325, the lowest close for this year. Last December the U.S. dollar index was 103; 13% lower now then last December. That makes U.S. pork more competitive in foreign markets. One of the major trading competitor for U.S pork is Europe. Last December the Euro was 1.04 to the U.S dollar; last Friday the Euro was 1.207 to the U.S. dollar. This is a huge advantage currently for U.S. pork in foreign markets. We are hearing that U.S. pork is taking business from European packers in Asian markets due to this currency adjustment. This change in currency should be supportive to U.S. hog prices this fall
Last week we wrote about the fear we have that Gene Edited (GMO) pigs (pork) could diminish and/or threaten pork demand. We had several emails last week on this subject. Some positive to our commentary and some negative. The negative had the just that we are against science.
To be clear, that the farthest thing from our mind, its about can we sell GMO pork? We think this is a question our industry needs to take head on. What will consumers buy? Will export markets buy? Will retailers buy? Will your Packer buy? Questions need to be asked. If you can’t sell the pork its worthless. Ask your packer; what’s their position? Better we get ahead of this, then chase our tail in the years ahead.
“A market is never saturated with a good product, but it is very quickly saturated with a bad one” – Henry Ford (1863-1947)
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