What Does the Surge in Cash Hog Prices Mean for Producers?

 

Jennifer Shike, FarmJournal's Pork

July 29, 2020

 

With the large backlog of hogs caused by COVID-19 disruptions, some were surprised by the big surge in cash hog prices the past few weeks.

 

The negotiated base price of IA/MN hogs jumped 60% from $27.46 per cwt the first week of July to as high as $43.86 per cwt, according to the Daily Livestock Report. On Tuesday, the weighted average IA/MN base price was quoted at $42.81 per cwt, down 2.4% from the previous close and the first decline in eight days. The average national price was quoted at $42.61 per cwt, slightly lower than the previous close. 

 

“It is hard to say what cash prices may do on a day-to-day basis, but it may be helpful to review some  of  the fundamentals that may have contributed to the most recent rally and implication for August and September,” Steiner and Company, LLC, said in the Daily Livestock Report. “It is not unusual for hog values to be higher in the summer months. Some of that has to do with the fact that fewer hogs are available during this time of year, a function of a lower pig crop during winter months.”

 

For example, in the past five years, the DecFeb pig crop has averaged about 4.1% below the annual average. In addition to the seasonal tendency for hog values to be higher in the summer months, heat stress is also a key factor that impacts performance.   

“This year was expected to be different,” Steiner and Company said. “The temporary closure of some key processing facilities in April and May resulted in a significant backlog of hogs, a backlog that reportedly persisted throughout June when USDA last conducted its inventory count.”

 

If the only thing liming hog slaughter in the short- to medium-term was shackle space, rather than the typical summer factors, why would packers pay 60% more for negotiated hogs in the last three weeks, they questioned...

 

more

https://www.porkbusiness.com/article/what-does-surge-cash-hog-prices-mean-producers