Pork Commentary

 

Jim Long, President-CEO, Genesus Inc.

January 6th, 2020

 

Go Figure - Fewer Hogs Means Less Export

 

Last Friday, lean hog futures decreased in some months the limit.† The market story was primarily due to U.S. pork exports the week of Christmas, decreasing about 10,000 tonnes from the previous few weeks.† God help the stupidity of so many futures traders, in 2017 and 2018, exports declined 10,000 tonnes during Christmas week. Itís not a market correction itís a reality of logistics.

 

Historically, the week of New Year is also lower than the first full week of the new year export numbers released. One other factor, both the week of Christmas and New Year have fewer hogs slaughtered.

 

         Christmas week was 2,029,000;

         New Year week 2,293,000.

         Prior weeks were in the 2.8 million range.

         Almost 1.3 combined fewer hogs in the last two weeks.

 

Go Figure- there were fewer exports; there was less to export.

 

Itís like saying there is less ASF in China now. Of course there is, half the pigs are dead, there are less to die.

 

January is now here, the holidays are over.† Now the fun will begin. Tyson and JBS are on the brink of being Ractopamine free and able to export to China. Combined 180,000 slaughter hogs per day with new market potential. These are smart companies, the only reason they would have had going to Ractopamine free is access to China market. No other country in the world that matters in U.S. pork exports cares about Ractopamine.

 

What to watch in the next few weeks is hog slaughter numbers relative to carcass weights. We would expect a rapid decline in slaughter weights if U.S. Packers continue at a pace of 2.8 million head per week. If hog marketingís decline, weights will not decline as rapidly but total weekly pork tonnage will decline pushing hog prices higher.

 

We expect over the coming weeks Gross Packer Margins to decrease.† According to DTN Agdayta, they peaked near $70 a head in November and have since fallen under $50. As hog numbers decline so will Gross Packer Margins.† We only have to go back to last summer when they were below $20 per head.

 

In the commodity business, it appears everyone gets a chance to ride on the wheelbarrow.

 

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