Market Commentary: Wednesday, October 20/21

Transcript

Hog futures are trading lower on follow-through pressure and futures have now moved through initial support levels. A close at these levels will offset recent market support and could open the door for additional underlying pressure over the next two weeks. Although limited stability is starting to emerge in cash and pork values, the lack of buyer support in the futures market may test further market lows over the upcoming days. 

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

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

For the week ending October 22 the Western Hog Exchange OlyWest 20 weekly price is $1.95/kg dressed, the OlyWest 21 weekly price is $2.15/kg dressed, and the BP4 price is $1.99/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange.

Weekly Regional HOG PRICE Report

 

Things to Consider….

Historically speaking, pork cut-out values, as illustrated in the following graphs, are at their highest levels seen in history for this time of year.  Only in 2020 has pork cut-out surpassed the $100 US per cwt mark in the 4th quarter until this year.  

Pork cut-out has now spent most of 2021 above the $100 mark surpassing that price level back in March.  Expectations are for cut-out to drift lower into the end of the year, which is very seasonal, however a value sub $80, which is common at calendar year end, is not necessarily in the cards.

With the newly traded pork cut-out futures slowly gaining traction and volume, their values are becoming more usable to industry participants.  The December 2021 Pork Cut-out futures contract shown below has reached highs above $100 US per cwt and found significant support around $90 US.     Expectations are for the meat market to hold pork in and around $95 US per cwt as it trades currently.     Volatility is expected to continue as uncertainty around exports continues to loom.

With cut-out pegged near $95 for the end of the year, the historical spread below (green line) shows a spread to CME cash between $0 and $20 per cwt.  More recently the spread has been large around $20 US per cwt but on average remains around $10-15.  With cut-out at $95 that would result in a CME cash between $80-85 US per cwt for December lean hogs.  For reference Dec 2021 lean hogs are trading at $78.70 US per cwt implying a discount to cut-out more than what has been seen so far this year.

  October 5, 2021



Weekly Hog Price Recap

Regional and national cash hogs fell daily with heavier declines recorded early-week. In contrast, CME cash improved for much of the week, especially mid-week, however ended the week modestly lower. Most wholesale pork primals recorded higher values, excluding loins, which supported pork cutout $7.45/cwt over the previous week's average.  



Canadian market hog values generally declined, however those derived from base pricing which includes cutout did improve significantly. Hog values out of Quebec were up nearly $9/hog, followed by those out of Hylife which were $8.50/hog higher. Ontario hog values were nearly unchanged from the week previous, while the Sig 4 fell more than $2/hog. BP/TP fell $4.75/hog, while the OlyW 20 was down more than $4.25/hog and the OlyW 21 slipped nearly $0.50/hog. In the US, hog values out of Tyson dropped nearly $11.75/hog while JM fell near $10/hog from week ago levels.  

Weekly Hog Margins

Most monitored hog margins weakened again this past week on generally lower hog values and were further pressured by increased feed costs. Canadian farrow-to-finish feed costs climbed $0.90/hog while those in the monitored US region were up $1.15/hog. 

Hog margins out of Quebec strengthened $8 to $56.35/hog profits, followed by Hylife which rose $7.65 to $50.60/hog profits and the OlyW 20 which weakened $5.30 to $50.25/hog profits. Margins out of Ontario weakened $0.85 to $43.25/hog profits while the OlyW 21 fell $1.30 to $40.85/hog profits and the Sig 4 was down $3 to $37.10/hog profits. In the US, hog margins out of Tyson weakened $12.25 to $24.50/hog profits while JM margins were $11.30 lower to $10.75/hog profits.

US Regional Margins

  • Tyson: $ 24.49 USD X 1.2678 = $ 31.05 in Canadian Dollars
  • Morrell: $ 10.78 USD X 1.2678 = $ 13.67 in Canadian Dollars



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