Margins Decline $13 Per Head for Farrow-to-Finish Pork Producers
Greg Henderson, FarmJournal's Pork
September 18, 2019
Farrow-to-finish pork producers saw their margins decline $13 per head with average losses of $21. Lean carcass prices traded at $49.73 per cwt., $6.98 per cwt. lower than the previous week, according to the Sterling Pork Profit Tracker.
A year ago pork producer margins were negative $30 per head. Pork packers saw average profits of $35 per head, $10 more than the previous week.
Losses continued to grow for feedyards and the spread between feeder losses and packer profits only widened with a $1.50 per cwt. decline in cash cattle prices last week.
Packers bought the few cattle they needed at an average of $100.70 per cwt., leaving feedyard margins at a negative $203 per head. Packer margins held mostly steady at a historic $415 per head, leaving the spread between feeder losses and packer profits at $618, according to the Sterling Beef Profit Tracker.
The same week a year ago Sterling estimated feedyard profits of $38 per head while packer profits were $205, leaving a spread of $167 per head between the two.
(Note: The Beef and Pork Profit Trackers are intended only as a benchmark for the average cash costs of feeding cattle and hogs.)
For farrow-to-finish pork producers, Sterling Marketing president John Nalivka projects an average profit of $11 per head in 2019, as compared with an average profit of $1.35 per head in 2018...
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Are you ready to execute your marketing plan?
The United States-Mexico-Canada Agreement needs action soon so we donít miss out on additional market access.
Steve Malakowsky, Compeer Financial
via National Hog Farmer - Sep 18, 2019
We have seen this before. Twice this year we have had marketing opportunities based on optimistic expectations that China needs to buy U.S. pork. Will this be the third time?
After the United States announced plans to delay tariff hikes until Oct. 15, China has excluded pork, soybeans and other farm goods from new tariffs. Could this be the start of unprecedented loads of pork heading to China? Only time will tell, but are you willing to take a gamble that there wonít be another tweet or announcement from China that more tariffs will be added back into the mix?
Earlier this month the United States and China agreed to hold trade talks in early October. Hopefully this will materialize and serve as the ground work for a beneficial free trade agreement with China long term. Based on this news, the markets have responded with summer futures for 2020 in the low-$90s. We know how summer ended up, which was lower than expectations. Iím not recommending that you lock-in 100% of your production but be sure to have a defined plan and be ready to execute. This past summer we had the opportunity for $90-$100 hogs. We ended up with a CME index in July in the low-$70s.
Based on everything weíre hearing along with the reports coming out, African swine fever has been underreported in China. We have seen outbreaks now in Vietnam, the Philippines and most recently South Korea. In those Asian countries where pork consumption is high, demand will be up. We are starting to see this in the markets and in the most recent export numbers.
Looking at the July U.S. Meat Export Federation report, China purchased 26% of all U.S. exports when including variety meats. There isnít any reason to believe that this wonít become a trend and continue to drive markets higher. However, we have all been a part of this optimism in the past only to get burned.
If you start to layer in some profits and the market pushes higher, what is the worst that could happen? Is it better for you to miss out on hitting a home run for the first six months and take some profits off the table? Or are you willing to risk that opportunity again, which could disappear overnight?
With the problems facing China, this will have long-term impacts to China and the Asiana region. This will give U.S. pork producers tremendous opportunities into the distant future. My advice is to revisit your marketing plans, have a strategy and be ready to execute it.
What could go wrong? ...
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