Things to Consider….

As the markets settle into the final quarter of 2021, a review of where the “funds” or “large specs” are parking their money can provide insight to potential market direction and movement going forward.

Of all the commodities that influence hog production, the most noticeable of fund participation, or lack there of, is in the soy complex.  As can be seen by the soybean and soymeal Commitment of Traders graphs, the large speculative long position has been liquidating since early summer and is nearing a net neutral position heading into harvest.  What these graphs illustrate is that “spec” traders are not willing to invest (go long/buy) into the market as they would assume prices are declining and would rather be neutral or short the market.  For hog producers, this is positive news as the trend currently remains steady to weak for the protein complex which could provide a much-needed break to feed costs.  The bottom graph, illustrating the specs position in corn, shows a similar trend with spec traders easing up on the long position since the beginning of planting season.  These graphs are not a certainty of lower futures markets but do provide a tone to the market and potential direction for later this year and into the start of 2022.

The COT graph for lean hogs shown at the top portray major investment from the large spec starting in Jan/Feb of 2021 with the tone becoming less supportive during the past couple months with liquidation beginning as early as mid June.  That liquidation has been felt in the lean hog futures as shown in the Dec lean hog contract below.  The trend has obviously shifted to a lower bias however recent USDA H&P numbers are going to provide some short-term strength in the coming weeks providing an excellent opportunity for producers to hedge fall production at historically high levels. 

  September 14, 2021

Weekly Hog Price Recap

Regional cash hogs again declined daily while national cash was lower throughout most of the holiday-shortened week, with cash hogs down heaviest Tuesday. CME cash also declined daily with lighter daily declines at the end of the week. Wholesale pork primals were generally lower throughout much of the week however were mixed from the weekly averages. US pork cutout was $1.07/cwt under the previous week's average.  

Canadian market hog values declined generally $7-$11 per hog on the week. The OlyW 20 was down $11.50/hog, while hog values out Quebec fell more than $11/hog and the OlyW 21 declined near $10.25/hog. BP/TC was down $8.50/hog while the ML Sig 4 declined $8.25/hog, and hog values out of Ontario fell $8/hog followed by Hylife which declined more than $7/hog. In the US, hog values out of Tyson fell $7.25/hog while JM declined $8.50/hog from week ago levels.  

Weekly Hog Margins

Hog margins continue to weaken amid lower hog and pork values however did receive some offset support from a decrease in feed costs again this past week. Canadian farrow-to-finish feed costs fell nearly $1.70/hog while those in the monitored US region declined $1.35/hog from a week earlier.                      

Hog margins out of the OlyW 20 weakened $9.85 to $71.50/hog profits, while those out of Quebec fell $9.50 to $60.75/hog profits and Ontario declined $6.35 to $59.75/hog profits. OlyW 21 margins were down $8.55 to more than $54/hog profits, ML Sig 4 margins weakened $6.60 to $53/hog profits, and Hylife dropped $5.50 to $50.25/hog profits. In the US, hog margins out of Tyson weakened $5.40 to nearly $56.75/hog profits while JM margins were $7.25 lower to nearly $48.25/hog profits.

US Regional Margins

• Tyson: $ 56.68 USD X 1.2646 = $ 71.68 in Canadian Dollars
• Morrell: $ 48.17 USD X 1.2646 = $ 60.92 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.