The October price miracle continues with cash hogs 53-54% lean jumping to 64.41c; up about $ 22 a head in the last two weeks. That $22 per head, has cut producers losses by that amount. There is no profit at current prices, but it has sure slowed down the bleeding. A year ago, US cash 53-54% lean hogs were averaging at 51.80c; right now, US hogs (64.41c) are about $30 per head better year over year. A huge difference; about $75 million a week to the better for the industry.
USDA Pork Cutouts, last Friday, were 75.50c per pound. Packers still making good money on spread between hog prices and the cut-out price.
For the first time in many weeks, the US harvested fewer hogs last week, compared with same week a year ago. It should be noted that week day numbers were higher this year, but Saturday declined greatly.
The greater week day harvest, year over year can be attributed to new packer capacity; there being about 90,000 more this past week, compared to the year before. Then when we look at Saturday *, this year is about 125,000 fewer. Obviously, we don’t need as large Saturday harvest when we have grater week day capacity. We don’t have any idea why this past week’s hog numbers harvested are lower then same week last year. When we look at daily slaughter weights, it appears to us hogs are not backing up.
We are of the opinion that Packer Gross Margins (Pork Cutouts minus hog price) will erode as the new slaughter plants increase production. The chase for hogs will become more intense as Packers attempt to fill shackle spare and supply domestic and export customers. We believe the higher hog prices we are seeing now, is from increased packer competition. As hog numbers decline next year, from seasonal supply adjustments this will become even more obvious.
Nothing is a greater barometer of supply and demand in the swine industry, then small pig cash prices. Either early weans or feeder pigs. A year ago, USDA cash 40-50 lb feeder pig, were averaging $23.00 each. This past week the USDA average was $47.78. More then double a year ago, and about $25 per head higher. A huge difference for producers selling feeder pigs. Cash early weaned pigs averaged $36.00 last week.
We expect that small pig prices will continue to increase over the coming weeks. Demand will be strong for placement, for spring and summer markets. We expect to see plus $50 on early weans and plus $70 in feeders, in the coming weeks. The chase to find hogs to fill new packer shackle space is going to really push demand.
For several weeks the industry had day upon day of lower hog prices. There was a tremendous negative feeling. The recent surge in cash and future prices has given a positive psychological jolt to the industry. Markets prices are set up for supply, demand and attitude. Attitude is going bullish.
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