In tis file:
· Mission to the moon?
… rocket ship (lean hog futures) appears to be headed to the moon…
· Hog futures set life-of-contract highs on tightening U.S. supplies
… Prices have been rallying as consumer demand is rising due to easing pandemic-induced restrictions on dining and travel, analysts said…
Mission to the moon?
Despite rocket ship performance in the markets, industry remains in contraction.
Dennis Smith, National Hog Farmer
May 03, 2021
The rocket ship (lean hog futures) appears to be headed to the moon. Recall that I declared in January the hog market on a launch pad and ready for takeoff. I kind of had to apologize in early February as the rocket remained on the launch pad. Nearly the instant the article was posted in early February, we had lift-off, and hogs have been flying ever since. No more apologies. So far this year, lean hog futures have increased by 56.7%, leading all commodities. Corn, the major feed input in hogs, is in second place, rising by 52.9% year to date. So, while sharply higher hog prices are very impressive, it’s somewhat nullified by the fact that feed prices are also sharply higher.
In the wake of the disastrous 2020 year for hog producers, the USDA’s March quarterly “Hogs & Pigs” report detailed contraction in the industry, and no wonder. Breeding stock was reported at 97% of the previous year with sow numbers, down 61,000 from December and down 160,000 from March 2020. Not only was 2020 a debacle for producers, but losses for several years prior have triggered a major contraction in the industry. In fact, to date, weekly sow slaughter remains well above 61,000 per week, and during the week ending March 13, the sow kill reached 70,787, the highest sow kill in 602 weeks (September 2009).
Yes, despite the rocket ship performance of cash hog prices, the industry remains in contraction. The March “Hogs & Pigs” report indicated that March-May farrowings would be down 3% from last year and that June-August farrowings would be down 4%. The next “Hogs & Pigs” report is scheduled for release on June 24.
The USDA did not attempt to measure and quantify the nightmare that occurred one year ago during the COVID packing plant crisis. I’m not interested in reconstructing the carnage, but the fact remains that the USDA chose to ignore the fundamental situation and simply, instead, chose to “let the market figure it out.” This is exactly what has been happening since February. The USDA, in their April meat supply/demand table, finally lowered their pork production projection by 405 million pounds from the March projection. They’re now projecting production even with last year. This is still wrong, but at least they’re headed in the right direction. Analysts and producers making hedging decisions based upon the woefully incorrect USDA projections are clearly behind the eight ball.
Aggressive aborting of sows and euthanasian of baby pigs one year ago has created a massive hole in numbers both in terms of quantity and duration...
Hog futures set life-of-contract highs on tightening U.S. supplies
Tom Polansek, Reuters
via Financial Post (CAN) - May 03, 2021
CHICAGO — Chicago Mercantile Exchange lean hog futures soared to contract highs on Monday on tightening U.S. supplies and rising cash prices.
Prices have been rallying as consumer demand is rising due to easing pandemic-induced restrictions on dining and travel, analysts said. Hog supplies are tight after some farmers euthanized hogs or performed abortions on pregnant sows last year as slaughterhouses closed during COVID-19 outbreaks among workers.
CME most-active June lean hogs ended up 2.925 cents at 112.650 cents per pound, and futures set new life-of-contract highs. The market remained strong after finishing up by the daily, exchange-imposed 3-cent limit on Friday.
Cash prices were also firm, and the U.S. Department of Agriculture pork cutout value rose $1.20 for carcasses to $111.66 per cwt.
The lack of available hogs has led to negative margins for pork processors. Packers were seeing a $18.50 loss per head on Monday, compared to a loss of $9.25 a week earlier, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC...