Jim Long Pork Commentary, U.S. Pork-Cuts over $1.20 lb! May 25th 2021

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Jim Long, President and CEO Genesus Genetics

Last Friday U.S. Pork Cut-out value closed at $1.2086 /lb. First time we have gone over $1.20 in several years, a real reflection of strong domestic and export demand for Pork. Also last Friday, July lean hog futures closed at $1.16.5 /lb., a new life of contract high.

With 53-54% National average hogs $1.1168 /lb. it’s not hard to believe the hog price will continue to get stronger in the coming weeks as seasonal hog supply decline and lower weights will cut pork supply.

Other Observations

Expansion?

Still appears to be some serious PRRS and PED breaks ongoing. It appears some of these PRRS breaks are quite devastating with sow death loss, abortions and other pig losses.

The latest weekly U.S. sow slaughter 58,663 heads. This is at a level that would indicate next to no sow herd liquidation ongoing.

We are not aware of any new sow barns under construction in the U.S. Some talked about but that isn’t construction. We ask you as a reader, if you know of any let us know. We will report sow numbers if there are any in our next commentary. (we will protect details, email us at info@genesus.com).

Building costs will be a factor re new construction. We are told in Midwest a 2400 finisher is now $425 per space. It was $325-350 not long ago. Lumber, metal, concrete, labor has all gone up in price. We haven’t heard recent sow barn construction cost but expect it has increased 30% also.

Corn Price

September corn closed Friday at $5.73 a bushel down from contract highs on May 7th of $6.54 a bushel. Still extremely high. It appears crop is mostly planted and many areas reporting things looking better with rain and warmer temperatures. (Probably a big reason September has dropped 75¢ a bushel).

Pork Price

The Pork Market Price should continued to be supported by the strong Beef Cut-outs. Choice Beef closed Friday at $3.25 /lb., Pork Cut-outs $1.20 /lb. You don’t need to be a famed ag-economist to calculate the huge price difference. We expect Pork Cut-outs are being dragged higher by Beef. What is interesting is hamburgers taste and flavor is enhanced in many food service instances by bacon. Of course, pork bellies are $2.58 /lb.

Global Pork Market

The hog price in Spain (Europe’s largest producer) continues strong at the end of January it was 1.10 Euro/kg liveweight (60.33¢ U.S. /lb.) last Thursday it was 1.52 Euro/kg (83.89¢ U.S. /lb.). This current Spanish price is the highest we understand ever. Spain price is just like the U.S. price reflects strong demand domestically and in exports. The high prices in both countries supports each other in global markets.

It has been interesting to see Spain evolve from a Pietran Boar market. As Pork Exports have increased so has Duroc usage. Genesus has a large base of Duroc Boars in Spain for commercial production. It is a growing market for us.

Brazil on the other hand has seen hog prices fall. On April 29th, live weight 8.09 real/kg (68.6¢ U.S /lb.) May 20th 6.30 real/kg (53.82¢ U.S. /lb.). Domestic demand is weaker due to Covid economics re issues. Current hog price is lower than breakeven at current feed prices.

We still believe China has yet to see implication in their cash market of third wave ASF. Told today of an outfit 80,000 sows now 10,000 after third ASF wave. Market will be the truth in the end.

Summary

High Pork Cut-outs, high hog price, high feed costs. We expect hog price to stay strong or stronger pulled up by strong domestic-export demand and high beef prices.