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Hog futures are trading sharply lower to limit down at midday. Strong underlying pressure has quickly redeveloped in hog futures as traders quickly back away from previous attempts to stabilize the market surrounding changes in demand associated with coronavirus. The combined total of Thursday's limit losses, wholesale pork weakness, and increased hog inventory numbers has sparked a bearish trifecta this morning. Although it is uncertain if most futures contracts will use expanded trading limits through most of the day, the fact that prices can move $4.50 per cwt lower and have broken through support levels seen earlier in the month could spark some increased weakness through the entire complex. Hog numbers in the quarterly hogs and pigs report posted a 4% increase from year ago levels. Although it seems like there is light at the end of the tunnel due to farrowing intentions slowing through the summer months, there still remains a lot of hogs to move through the system in the upcoming weeks and months.
Cash hog bids are called $1 lower to $1 higher with most bids steady to firm. Prices are unavailable for the National and the Iowa Minnesota morning reports due to report delays. The morning cutout value is lower.
The Canadian Dollar is trading lower against the US dollar at midday.
For the week ending March 27, the Western Hog Exchange OlyWest 20 weekly price is $1.586/kg dressed and the BP4 price is $1.5851/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange.
Things to Consider….
I hope this message finds everyone safe and well during these unprecedented times. As we all need to play our part in the fight against Covid-19, let’s remember to recognize the guidelines issued by Health Canada and Government Agencies.
The latest US meat trade data reported January pork exports at 663 million pounds, 17.7 million pounds or 2.6% under the historical high reached in the previous report. This brought total US pork exports 185 million pounds over year ago levels or nearly 39% over January 2019.
Not unexpectedly, US pork to China* (including mainland China, Taiwan and Hong Kong) reported the largest move on the report, dropping 24.5 million pounds from the levels reported for December, but still managed to record the second highest monthly volume seen over the last 5 years. Mainland China alone dropped 24.6 million, with Hong Kong down near a million pounds and Taiwan up near a million pounds.
A number of other major importers of US pork such as Colombia, Honduras, and the Philippines also made notable declines, each generally 2-4 million lower from levels previously reported. South Korea also reportedly decreased their volume of US pork, down 1.2 million pounds into January. Panama dropped shy of 13 million pounds for January to return to more typical levels following the seasonal December surge in US pork purchases.
Other major destinations for US pork such as Japan and Mexico, and to a lesser degree Dominican, Australia and Canada helped offset earlier stated declines. Japan increased their imports of US pork by more than 7 million pounds, Mexico by more than 6 million pounds while the latter countries increased imports of US pork generally 3-4 million pounds for January.
US cash hog markets have traded higher for 14 consecutive days and are now sitting at the highest level since October 30th 2019, nearly a 5-month high. Lean hog futures are recovering but will need more time to make back losses experienced over the past month as they followed equity markets lower.
March 17, 2020
Weekly Hog Price Recap
Cash hog values improved throughout most of the week with the strongest daily gains reported midweek when packer cash bid volume was also reported at higher levels. CME cash climbed daily however at more moderate levels compared to moves reported in regional and national cash hogs. Wholesale pork found strength as most pork primals improved in value, excluding hams. Pork cutout rose $2.30/cwt from week ago levels.
Monitored Canadian hog markets improved generally $3-$8 per hog over the previous week. The OlyW 20 climbed more than $3/hog higher while pricing out of the Sig 4 rose $5.75/hog and Hylife rose closer to $6.50/hog. The Sig 5 was up near $7.50/hog, while values out of Ontario and Quebec were each up more than $8/hog. In the US, Tyson values climbed $1.25/hog higher while JM values increased $6/hog from the previous week.
Weekly Hog Margins
Monitored hog margins improved on good weekly cash hog values with Canadian margins averaging $21/hog losses overall. Feed costs did counter some of the overall improvement to hog margins north of the border, with Canadian farrow to finish feed costs rising $0.50/hog while those in the monitored US region fell more than $1/hog.
Margins out of Quebec remain the least weak compared to other Canadian margins, up more than $7.50/hog on the week and calculating $14.50/hog losses. Hog marins out of Hylife strengthened $6 per hog to $18/hog losses and the Sig 4 improved $5.25 per hog to $19.50/hog losses. Margins out of Ontario improved shy of $8/hog from the previous week to $21.50/hog losses, while the Oly20 strengthened $3/hog to $25/hog losses. In the US, margins out of Tyson improved $3/hog to $11.25/hog losses while JM margins strengthened $7.25/hog to $12/hog losses.
US Regional Margins
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At this point, given all we know about the novel coronavirus, many have been wondering and asking what the spread of the disease and slowing of the economy has done to meat prices and particularly pork and hog prices in Canada and around the world.
In this week’s article we are going to review some of the recent trends in hog prices around the world compared to a Canadian price represented by the ON average. All the graphs illustrated have been converted into CAD per kg to show comparison in direction and value.
First, hog prices in China currently trading at $7.00 CAD/kg compared to $1.35 CAD across most Canadian regions confirms that the impact of the virus in China did not have a negative influence on hog prices. The affects of ASF in Asia and Europe are still being felt across the country.
Secondly in Europe, now considered the epicenter of the virus, hog prices have continued to gain momentum as shown by cash hog prices in Poland at $2.90 CAD/kg and Denmark at $2.91 CAD/kg. Also, important to note, both European countries have seen prices increase following the spread of Covid-19 and resulting closures of many social services and travel.
The reality of the situation is that meat consumption has not been negatively impacted by the spread of the virus as would have been projected based on the reaction of the lean hog futures market. But instead the hording of food including meat and the increased domestic consumption due to more people cooking at home has actually created a demand pull in the market. Many supply chains are being put to the test right now including meat supplies which continue to fly off the shelf at an unprecedented rate. Wholesale suppliers are scrambling to replace retail orders and packers are scrambling to replenish wholesale stocks.
As domestic demand for meat reaches a new seasonal high and certain areas of the world (Asia) begin to see the light at the end of the tunnel, hog prices in Canada and the US are expected to improve. Not only are supplies beginning to decrease domestically but exports once again will see further improvements adding to the support to prices.
March 10, 2020
China vs Canada (ON) CAD/kg
Poland vs Canada (ON) CAD/kg
Denmark vs Canada (ON) CAD/kg
USA vs Canada (ON) CAD/kg
Source: pig333
Regional and national cash hog pricing improved midweek when packer cash bid volume was also higher. CME cash by comparison improved the latter half of the week, offsetting declines made earlier. Wholesale pork values finished the week generally higher, as early-week strength helped primals improve over week-ago levels. Pork cutout rose $1.41/cwt on the week.
Monitored Canadian hog markets improved generally $1.50/hog from week ago levels, excluding the Sig 5 which was up more than $2/hog as the Sig 3 jumped $4.50/hog. The OlyW 20 rose closer to $1.75/hog, while remaining monitored Canadian markets were modestly under $1.50/hog. In the US, Tyson values fell $0.25/hog while JM values increased $2/hog from the previous week.
Canadian hog margins were only modestly improved with gains in hog values being offset nearly entirely by rises in feed costs. Current hog margin levels are near $27 per hog losses overall. Canadian farrow-to-finish feed costs rose $1.39/hog while those out of the monitored US region were $0.70/hog over the week previous.
Margins out of Quebec continue to remain the least weak compared to other Canadian margins, however were fairly stable at $22/hog losses. Margins out of Hylife and the Sig 4 were also stable overall, generally around $24/hog losses. Margins out of the OlyW 20 improved $0.25/hog to $27.50/hog losses, while those out of Ontario strengthened $0.10/hog to $29/hog losses. In the US, margins out of Tyson edged $0.40/hog weaker to $14.50/hog losses while JM margins strengthened $1.75/hog to $19.50/hog losses.