Things to Consider….

Cash hog prices have traded relatively flat since the middle of February when the CME lean hog index hit $100 US per cwt for the first time in 2022.  Only in the last week have regional markets, like the WCB or ISM surpassed their highs of the year trading upwards of $110 US.     With continued strength expected in regional markets, the index price is projected to move higher entering the second half of the second quarter.  

Tightening hog supplies south of the border which have been confirmed by many sources have the potential to raise lean hog cash prices further. However, without strength in cut-out, cash is going to be limited in its advances as packers are not willing to purchase abundant supplies at inverted margins.  

Historically, cash can trade above cut-out however as shown in the Cash vs Cut-out Price Spread graph, the occurrence of cash above cut-out does not last very long.     Since 2015 there are less then 20 days where the spread was inverted/negative.  

Pork products are going to be the limiting factor heading into the summer months.  The cut-out graph illustrates how pork primals were tracking like 2021 throughout April but dropped off sharply at the start of May which is counter-seasonal when entering the summer months.

Recent news has referenced some easing of lockdowns in China as of late which could lead to pork purchases aiding the value of primals in the coming weeks and months.  Also improving weather conditions in North America are leading to expectations of seasonal increases to consumption. 

With the recent collapse in lean hog futures producers are encouraged to take advantage of the annual top in cash markets until premiums are restored in the forward markets.

  May 10, 2022

Weekly Hog Price Recap

Regional and national cash hogs were mixed to generally higher on good mid-week rises while recording declines at the start and end of the week. Alternatively, CME cash fell daily however recorded more moderate moves compared to cash hogs. Wholesale pork primals varied during the week with pork cutout ending $0.21 /cwt over the previous week's average.

Canadian market hog values were generally lower on the week, excluding those derived from lag-based pricing mechanisms. Hog values out of Ontario fell $2.10/hog, followed by those out of Hylife and the ML Sig 4 with each down $1.50/hog from a week earlier. The OlyW 21 slipped $0.60/hog, while the OlyW 20 improved $3/hog. Hog values out of Quebec edged $0.40/hog higher, while BP/TC values were up $7.25/hog. In the US, Tyson hog values were up $1.30/hog while JM fell $1.20/hog from week ago levels. 

Weekly Hog Margins

Monitored hog margins improved on the week despite some pressure to hog values, receiving support from a significant decline in feed costs. Canadian farrow-to-finish feed costs dropped $4.25/hog while those out of the monitored region in the US fell shy of $3/hog from a week earlier.
 
Hog margins out the OlyW 20 strengthened $7.30 to $38.65/hog profits on the week, followed by those out of Ontario which improved $2.20 to $29.65/hog profits. Hog margins out of the ML Sig 4 and Hylife each strengthened $2.75 to $22.65 and $19.55 per hog respectively, while the OlyW 21 improved $3.70 to $14.20/hog. Hog margins out of Quebec continue in the red, however strengthened $4.70 to $11.30/hog losses. In the US, Tyson margins improved $4.25 to $50.70/hog profits while JM was up $1.75 to $49.35/hog profits from the previous week.
 

US Regional Margins

• Tyson: $ 50.71 USD X 1.2851 = $ 65.17 in Canadian Dollars
• Morrell: $ 49.37 USD X 1.2851 = $ 63.45 in Canadian Dollars

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