Market Commentary: Friday, November 26/21

Transcript

Hog futures are trading sharply lower at midday after a dismal export report. Pork net sales were down 30% from the previous week and 43% from the prior four-week average. The three largest buyers were Mexico, Japan, and South Korea. The remaining weeks of 2021 could be tough for the hog complex as the holidays slow down production and the futures market is subject to volatile swings.

Cash hog prices on the National morning report are lower, the morning cutout value is also lower. 

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

For the week ending November 26 the Western Hog Exchange OlyWest 20 weekly price is $1.67/kg dressed, the OlyWest 21 weekly price is $1.87/kg dressed, and the BP4 price is $1.73/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange.

Weekly Regional HOG PRICE Report

 

Things to Consider….

Since the end of October, nearby and deferred lean hogs futures have traded in opposing directions providing varying opportunities for producers looking for risk mitigation in late 2021 and into 2022.

As illustrated by the lean hog futures charts, nearby December 2021 has traded unchanged from late Oct to late Nov.  That, following the sharp run up in the first week of October in reaction to the September Hog & Pig report released on Sep 24th which was then followed by an equivalent collapse during the month of October.   With December hogs trading range bound just above $75 US per cwt, the expectation is for that contract to expire near $75 as CME cash prepares to merge with the nearby around the 14th of December.

A sharp contrast to the direction of the December has been the activity in Feb, April and most other 2022 hog contracts.

The spread chart shown above illustrates that in early October the Dec contract was approximately -$3 below the Feb contract (red line), and had been that way since March 2021.  Historically speaking the Dec contract has shown a spread to the Feb anywhere from 1 under to as much as 6 under before commonly leveling out in the fall and settling between 4 and 6 dollars below the Feb at expiry.  However recently in 2021, the weekly spread chart shows that Dec traded to as much as $7 under the Feb and the daily trade went beyond $8 below the Feb.     

The large gap or spread between Dec and Feb indicates that the market anticipates lower cash due to more hogs into the end of the calendar year, but does not believe the numbers will be burdensome once into the start of 2022.  The market is unwilling, based on the larger than normal spread, to bring Feb down with December.  Other positive news is the June 2022 lean hogs and other summer months have reached new contract highs this week, as the market anticipates further tightening of supplies once into the middle of 2022 which was projected in the last USDA H&P report released in Sep.

The next major supply report is to be released in late December, on the 23rd.     That report will either confirm the numbers published in Sep or provide a new set triggering further reaction and direction for the market.

  November 16, 2021


Weekly Hog Price Recap

Cash hogs declined near daily, with regional and national cash reported higher only Thursday. CME cash was also recorded lower moves overall, however resulted in a more moderate week-over-week change compared to cash hogs. Most wholesale pork values slid throughout much of the week, only hams and ribs finished higher, with US pork cutout down $2.52/cwt from the previous week's average.  



Market hog values generally declined, however some markets managed to improve on the week such the OlyW 21 which climbed more than $1/hog and the ML Sig 4 which was up shy of $0.75/hog. Hog values out of Quebec and Ontario each fell near $1/hog, while the OlyW 20 was $2/hog lower, Hylife fell $4/hog and BP/TC dropped shy of $6/hog. In the US, hog values out of Tyson declined $6/hog while JM was down closer to $5.75/hog from week ago levels.  

Weekly Hog Margins

Monitored hog margins generally fell on the week as most markets recorded lower values. Feed costs modestly impacted hog margins, with Canadian farrow-to-finish feed costs climbing $0.25/hog while those in the monitored US region edged $0.15/hog lower than a week earlier.   

Despite the continued slide in hog margins, monitored Canadian margins remain at positive values. Hog margins out of the Quebec weakened more than $1.25 to $15.50/hog profits, while the OlyW 20 fell $2.25 and OlyW 21 was up shy of $1 with each near $10.50/hog profits. Hylife margins weakened more than $4 to $9.50/hog profits, while ML Sig 4 margins strengthened $0.50 to nearly $2.75/hog profits and Ontario fell nearly $1.25 to $0.25/hog profits. Hog margins in the US face dollar per hog losses, with Tyson and JM each weakening near $5.75 on the week to $12.25/hog and $24.25/hog losses respectively.

US Regional Margins

  • Tyson: $(12.36) USD X 1.2473 = $ (15.42) in Canadian Dollars
  • Morrell: $ (24.33) USD X 1.2473 = $ (30.35) in Canadian Dollars



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