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Market Commentary: Wednesday, January 20/21

Transcript

Hog futures are trading higher at midday as traders retract from sharp triple-digit losses yesterday. Hog futures contracts are getting a lift from the continued decline in grains prices on the CBOT and support is also coming from higher cash prices and cutout values.

Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents lower. Prices are higher on the National morning report and the morning cutout value is higher. 

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

For the week ending Jan 22, the Western Hog Exchange OlyWest 20 weekly price is $1.505/kg dressed, the OlyWest 21 weekly price is $1.690/kg dressed, and the BP4 price is $1.5231/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange.

Weekly Regional HOG PRICE Report

 

Things to Consider….

Feed prices to start the year are certainly not what hog producers were looking for, coming off a year of less-than-ideal margins.  Escalating futures have pushed delivered feed prices to 7-year highs with current prices not seen since the commodity run of 2014.  Although the Canadian dollar, which is trading slightly above the 2020 average has eased the surge by a small margin, it has not compensated for the major swing upward in most feed grain and protein markets.

Soymeal, canola meal, peas, DDG’s and most other protein sources whether traded on the futures exchange or in the cash market have all seen relative moves higher on persistent news of dryness in South American and a looming drought just across the border in much of the US Delta and Northern Plains. Although the severe drought has yet to reach the US Midwest, long-term forecasters are beginning to become concerned with the dryness as it continues to move east.  The US Drought Monitor comparison below shows year over year differences with much of the US wheat growing regions now in jeopardy.  If conditions persist over the coming weeks and months, many of the already planted wheat acres and unplanted spring acres could shift to more profitable crops like soybeans and corn.  With soybean and corn prices up 30-35% in the last quarter and wheat only 15% higher, the switch to more profitable crops could lead to fewer wheat acres in 2021.  Time will tell as the battle for seeded acres heats up over the next couple of months.

For now, all eyes are on the January 12th WASDE report and NASS Crop Production report which currently has both soybean and corn ending stocks dropping further on strong demand.     The final production numbers for 2020 will also be reported by the USDA on the 12th.

At this point, much of the bullish news has been factored into the futures and resulting delivered prices.     Hog producers and other feed users should look for the reports being reported this week as the latest news to provide the next trend in feed pricing.  



January 5, 2021


Weekly Hog Price Recap

Regional and national cash varied during the holiday-shortened New Year week, with regional cash facing mid-week declines. Despite being reported lightly higher for much of the week, CME cash averaged below the previous week. Wholesale pork primals made significant increases by the end of the week, excluding picnics. US pork cutout rose $3.91/cwt from the previous week.  

Canadian hog markets were generally $4.50 to $6.50 per hog under week ago levels, excluding those out of Hylife which rose $4/hog and those out of the OlyW 21 R2 which fell $0.70/hog from the previous week. For reference, the OlyW 21 fell shy of $6/hog (not including the floor price). The OlyW 20 declined $6.50/hog, while values out of Quebec fell $6/hog. Hog values out of Ontario dropped $5.25/hog, while the Sig 4 fell nearly $5/hog and BP/TC pricing declined $4.50/hog. In the US, Tyson fell more than $3.50/hog while JM was down $1.50/hog from week ago levels.

Weekly Hog Margins

Another week of falling hog and pork values weighed on hog margins this past week and were further pressured by a rise in feed costs. Canadian farrow-to-finish feed costs rose $2.35/hog while those in the monitored US region increased $2.65/hog from a week earlier. 

The OlyW 21 R2 weakened $3 to $25.25/hog losses and the OlyW 20 was down nearly $9 to $30.25/hog losses, while Hylife improved $1.74 on the week to $27.75/hog losses. Margins out of Quebec fell $8.50 to $37/hog losses while the Sig 4 was down $7.25 to $35.25/hog and those out of Ontario weakened more than $7.50 to $43/hog from the previous week. In the US, Tyson margins were down nearly $5.50 to $30.25/hog losses while JM margins weakened $4 to $35.75/hog losses.

US Regional Margins

  • Tyson: $ -30.18 USD X 1.2769 = $ -38.54 in Canadian Dollars
  • Morrell: $ -35.80 USD X 1.2769 = $ -45.71 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.