Allan Bentley, Sales, Genesus Genetics, Inc.
I heard someone on the radio talk about June hogs being higher than June cattle. As I write this, hogs June hogs are $115 and June cattle are $114. However you have to remember that cattle are traded live and hogs are carcass based, so compare apples to apples, carcass cattle are closer to $185. Now having said that it is still unusually narrow. Cattle cut out value is about $305 while hog cut out value is about $111; with those huge margins in cattle for the packer and losing money on killing hogs, I am surprised they aren’t going to raise the lines at the hog plants and start killing cattle!
I was asked again how high hogs are going to go? With cattle cutout prices almost 3 times higher I don’t think we are done with higher prices for hogs. I understand the cattle feeder is taking it in the shorts but fortunately hog producers are coming out smelling like a rose. They are the train and I would not advise getting in front of that train right now.
Speaking of higher prices, grains are on fire also. The grains also seem to be a train heading full steam higher. I do not think I have ever seen so many elevators making calls trying to buy corn or beans for new crop or old crop. That narrowing basis confirms that.
Historically I would be advising selling Dec hogs at $83 ($62 live). I will say the only way I would sell December hogs is if you can lock in $6.00 corn to feed them. I would not advise doing one without the other.
One year ago we were euthanizing fat hogs because the packers were shut down. Today I heard bids at $125. The consensus among the producers I talk to is they do not feel to sorry for the packers. That leads me to one more comment. There are times to negotiate and times it is better to keep both oars in the water. I would seriously take advantage of today’s markets to discuss any upgrade in your pricing matrix with your packer. The packers are aggressive right now and I would take advantage of the aggressiveness. They are trying hard to hold the line on price but now the competition amongst them is creeping in and they are looking to sort some hogs off of each other. So lets take advantage of being on top for a change.