Pork Commentary

 

Jim Long, President Ė CEO, Genesus Inc.

Sep 3, 2019

 

A few Market Observations

 

A year ago 53-54% U.S. market hogs were 44.60₵ lb. this year last week 69.62₵ lb. This year market hogs are bringing $50 more per head.

Last week U.S. cash feeder pigs averaged $37.02. A year ago same time they were $20.00.

 

DTN-Ag Data does a calculation daily on Livestock Margin and what you can pay for a 45 lb. feeder pig. Assumptions used are generally in favor of feeder pig buyer when they use assumptions that are far below industry norms i.e. feed conversion 3.1 to 1 (norm 2.8-1). Average daily gain 1.70 lb. (norm 1.90 lb.) even despite these marginal assumptions, last Friday Livestock Margin calculation showed you could pay $52.05 for feeder pig. The market usually trades close to this calculation.

Last week U.S. marketed 2,461,000 compared to 2,464,000 a year ago. Year to date U.S. marketingís are up 3.0%

Holidays are bad for producers. It appears U.S. packers were not aggressive Saturday with 82,000 head. With holiday Monday looks like plant employees got 3 day weekend. When harvest days are limited it usually drives hog prices lower.

It appears harvest weights are similar to a year ago, in the 208 lb. range. This tells us that hogs are current relative to a year ago.

We reiterate what we wrote a couple weeks ago. Few is any new sow units being built in the U.S.A. In our opinion most producers have seen little if any profits over the last year. Profits create expansion.

 

Pays to have access to China market. Spain has liveweight at 74₵ U.S/lb., in U.S. is 48₵/lb. liveweight. Thatís a $70 U.S. per head difference. China market access and significantly less tariffs is a huge advantage to Spain.

 

European Pork Exports to China January-June year over year increased 41.9%. 680,686 tonnes (2018) vs 965,768 tonnes (2019).

 

Corn - Soybeans. With Chinaís swine inventory officially down 32% approx. 140 million head, is there any wonder they donít need soybeans (corn) even if trade war gets settled. Canít imagine we will see surge in soybean exports. Pork gets moving with tariff relief, look at Spanish prices to see where we would get to (74₵ U.S./lb. liveweight)

 

China Update

 

         China National Average hog price last week: 26.21 rmb kg- $1.68 U.S. liveweight lb.

         South China had highest market 29.29 rmb/kg- $1.88 U.S. liveweight lb.

         Estimated profits farrow to finish (if have a full herd) 1509 rmb/head- $97 U.S. per head.

         Sow inventory 33.26 million- Year over Year down 31.2%

         Feeder pigs 47.95 rmb\kg. - $3.10 U.S. lb. - 45 lb. pig $139.

         China corn price 1,936 rmb ton = $7.85 U.S. bushel- 6.8% higher than a year ago.

         China Soybean Meal Price- 3078 rmb ton = $436 U.S. Ton

 

We expect the record high hog prices in China will lead to increased pork and other meat imports. There are reports of pork rationing in some areas. Time will tell but nothing we can discern shows ASF under control.

 

genesus.com