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Market Commentary: Tuesday, December 10/19

Transcript

Hog futures are trading mostly higher. Moderate support quickly moved into the hog complex as reports that the US and China are working on a plan to delay the December 15 tariffs as both sides work on a partial trade agreement is sparking some underlying buyer momentum through the complex. Also supportive is the new USMCA trade deal is close to passing through Congress. For US pork producers, a new free-trade agreement will hopefully allow more of the ample supply of pork in the US to be directed to Mexico.

Cash hog bids are called steady to 50 cents higher; most bids steady to firm. Prices are higher on the National and unreported on the Iowa Minnesota morning reports. The morning cutout value is higher. 

The Canadian Dollar is trading lower against the US dollar at midday. 

For Tuesday, December 10 the Western Hog Exchange OlyWest 19 base price is $1.420/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange. 

Weekly Regional HOG PRICE Report

 

Things to Consider….


From time to time it is good to review small pig pricing and trends as it can have a good indication of what is to come for market hog values in the future.     Although many readers are likely farrow to finish, the information below pertains to the entire industry illustrating the current situation.

As of late November, small pig prices have registered seasonally low levels trading at the weakest price seen in over 5 years.

Traditionally, isowean prices begin their accent to annual highs beginning in early September peaking during the first 6-8 weeks of the New Year.  The rise in isowean prices during fall and winter months is obviously linked to the summer futures market which naturally is when isoweans will go to market as slaughter hogs.  In 2019 however, isowean prices, although slightly higher than summer lows, have not managed to make up much of their seasonal gains.     The lack of support and surge higher is attributed to weakness in the summer futures market and abundance of spot animals on the market.  

The abundance of small pigs available (regardless of finishing economics) influences the “spot” market unfairly allowing buyers to force prices lower than necessary.     For example, the break-even valuation of an isowean in late November was approximately $65 US while “cash spot” prices traded near $30 US.  The difference in value illustrates aggressive margins being chased by finishers who likely were not covered during the current market period and are making up for significant losses in the last quarter. 

The cash isowean price illustrated in the top chart and feeder pig prices in the bottom chart represent USDA open market spot averages.  These numbers are reported in the USDA weekly report known as the 255 report.  Producers selling isoweans or feeder pigs should consider alternative pricing mechanisms to the “cash market” as it does not accurately represent hog production economics on either side of the border.

The trend in small pig pricing will continue higher for another 10-12 weeks however new records are not expected early in 2020.

November 26, 2019




Weekly Hog Price Recap

Cash hog values were weaker much of the week, however managed modest daily increases midweek. CME cash was also mixed during the week, however managed to end the week modestly higher. Wholesale pork values varied throughout the week however pork cutout ended $2.43/cwt under the previous week. 



Monitored Canadian hog markets were $0.50 to $5.75 per hog higher from a week earlier, excluding those derived from a lagged base pricing such as BP/TCP. Values out of Quebec were up the strongest, supported by pork cutout. The OlyW 19 improved near $2.50/hog, while Hylife and the Sig 4 each climbed $1/hog. Values out of Ontario as well as the Sig 5 edged $0.50 per hog higher. In the US, Tyson fell $3/hog while JM edged $0.25/hog lower.


Weekly Hog Margins

Canadian hog margins strengthened, helped by a modest decline in feed costs. Farrow-to-finish feed costs edged $0.10/hog lower north of the border while those out of the monitored US region edged $0.15/hog higher. 

Hog margins improved the most out of Quebec, up near $6/hog, while those out of the OlyW 19 strengthened $2.50/hog. Margins out of Hylife and the Sig 4 each improved more than $1/hog, while hog margins out of Ontario and the Sig 5 improved less than $1/hog. In the US, Tyson hog margins weakened close to $3/hog while JM margins weakened $0.50/hog from a week earlier.

US Regional Margins

  • Tyson: $ (28.22) USD X 1.3265 = $ (37.43) in Canadian Dollars
  • Morrell: $ (37.92) USD X 1.3265 = $ (50.30) in Canadian Dollars



Disclaimer: Commodity Professionals Inc. presents this report as a snapshot of the market using current information available at the time of the report. These findings are for informational purposes only and should not be reproduced or transmitted by any means without permission.     Commodity Professionals Inc. does not guarantee, and accepts no legal liability arising from or connected to, the accuracy, reliability, or completeness of any material contained in the publication.