Things to Consider….

With the first half of 2021 now behind us and the market settled well into the 3^rd quarter, a clearer picture of slaughter and total pork production are starting to emerge.  The impact of 2020, when liquidation occurred, has now surfaced in the numbers as shown by the US Federally Inspected Slaughter graph.  

Up until late June, 2021 slaughter (red line) recorded volumes above both 2018 and 2019.     However since the long weekend in early July, 2021 slaughter has been lower than 2018 and 2019 for 5 consecutive weeks. It is worth mentioning that the declines are very minimal compared to those years, but non the less they are lower and are projeccted to continue lower for the remainder of the marketing year.

At first glance the lower slaughter, lighter weights and reduced pork production might indicate a bullish price trend into the late fall months however a quick look at December futures relative to the last 6 years show that the above mentioned bullish factors are already priced into the market.

Hog producers looking to protecct against potential market weakness due to unforseen issues that may arise later this year, should use the current pricing opporuntity to limit risk for the end of 2021 and early 2022.  The market is expected to be volatile and from the trend that appears to be forming in the December lean hog contract shown below, hedging is recommended soon than later.

  August 17, 2021

Weekly Hog Price Recap

Regional cash hogs varied with mid-week declines offsetting more modest improvements recorded in the week, while national cash declined near daily. CME cash fell every day, however generally at more conservative daily moves. Most wholesale pork values declined on the week which weighed pork cutout $2.10/cwt under the previous week's average.  

Canadian market hog values declined as much $4/hog given the decline in cash hog and pork values. The ML Sig 4 fell $4/hog, followed closely by hog values out of Ontario and Hylife and those out of Quebec fell shy of $3.50/hog. Markets derived from lagged base pricing recorded improvement with the OlyW 21 up shy of $1/hog, BP/TC up closer to $0.75/hog and the OlyW 20 was near even with the week previous. In the US, hog values out of Tyson & JM each fell near $4.75/hog from week ago levels.  

Weekly Hog Margins

Most hog margins recorded significant weakness from week ago levels, pressured by decreased hog values and further weighed on by an increase in feed costs. Canadian farrow-to-finish feed costs climbed $1.65/hog while those in the monitored US region increased a little more, up $1.80/hog from a week earlier. 

Hog margins out of the OlyW 20 weakened $1.50 to $97.25/hog profits, while those out of Quebec fell $5 to $86.40/hog profits and Ontario declined $5.50 to $84.65/hog profits. OlyW 21 margins were down $0.75 to $77.25/hog profits, Hylife margins weakened $5.40 to $75.40/hog profits, while ML Sig 4 dropped $5.60 to $70.75/hog profits. In the US, hog margins out of Tyson weakened $5.85 to nearly $75/hog profits while JM margins were $6.50 lower to $69/hog profits.

US Regional Margins

• Tyson: $ 74.88 USD X 1.2529 = $ 93.82 in Canadian Dollars
• Morrell: $ 69.01 USD X 1.2529 = $ 86.46 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.