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Market Commentary: Thursday, August 16/18


Hog futures are trading limit up in the first three months and sharply higher in other months. The news of renewed talks with China has helped to refuel a bullish overall market trend as many see this as a glimmer of hope that current and proposed tariffs may be avoided in the future if both sides continue to negotiate. October through February contracts are holding $3 per cwt gains with increased overall support through the complex. This has continued to push nearby and deferred futures further away from long-term support levels which developed last week. Even though deferred contracts remain less aggressive, triple-digit gains are seen in all contract months.

Cash hog trade is called 50 cents to $2 per cwt lower; most bids are $1 per cwt lower. Prices are lower on the National and on the Iowa Minnesota morning reports. The cutout value is higher.  

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

For Thursday, Aug 16, the Western Hog Exchange OlyWest price is $1.157/kg dressed and the OlyWest plus price is $1.167/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange. 

Water Based Tattoo Ink Advisory

Weekly Regional HOG PRICE Report


Things to Consider….

As the cash hog market takes a tumble to exceptionally low seasonal prices the futures market appears to have found a near-term bottom, for now.  The graph to the right illustrates the trade activity of the December LH contract which traded below $45 US per cwt for 3 days in the last 2 weeks and has since appreciated to the upper $40’s per cwt and nearly reaching $50 per cwt in early trade on Monday.  Although nothing major has surfaced in the way of super positive news, the reality is there has been a lack of super negative news released in the last couple of weeks.

Lean hogs for next year (2019) have also registered what could be the low for the year.  As is noticeable in the graph to the right, April lean hogs have tested the value of $58.20 US per cwt 3 times in the last 2 weeks, with each time resulting in support and a slight rise in price.  Although this is not a major indicator of a market turn around, it does confirm market interest in supporting prices at these levels.

Last week’s article talked about US pork Exports and the fact that volumes through June 2018 remain above the same period in 2017.  Information such as this has led to the positive trade seen as of late.

During the last 3-4 months 4th quarter 2018 hog contracts have been greatly impacted by the news of trade tariffs and looming losses to exports markets.     The spread chart to the right shows how December has been greatly devalued compared to further out contracts such as April 19.  As of this week, December is trading $13.00 US per cwt below April when historically, both the 5-year and 10-year averages are closer to $6.00 under during this time of year.  Also shown in the graph is that at December’s expiry the 2 contracts are historically around $8 apart, Dec being lower.  For that to happen, either Dec must rise, or April must come down.  Of course, contracts can expire much wider than history has proven however there does exist some chance Dec could rise to narrow the spread closer to the negative $6-8 for the remainder of its contract life.

Hog producers are encouraged to continue holding for further gains prior to adding to forward contracts positions.

August 14, 2018

Weekly Hog Price Recap

Regional and national cash hogs declined significantly throughout the week, however the greatest declining days were reported midweek. Cash bid volume was stable throughout the week, 5-7 thousand daily regionally and 9 thousand daily nationally.  Cash hogs were down $9.50/cwt from a week earlier, while CME cash fell more than $6/cwt on the 5-day average. Wholesale pork declined primarily on lower belly and rib values, with cutout down $1.81/cwt from the week previous.

Canadian hog markets based off slaughter-derived pricing declined the most on the week.  The WHE declined more than $20/hog, followed by pricing off the Sig 5 which fell $19/hog. Other Canadian markets, those with base pricing including figures from the 201, fell $14.50-$17/hog from a week earlier. In the US, VMR-based Tyson fell shy of $18/hog while JM declined close to $20/hog.

Weekly Hog Margins

Hog margins fell heavily on continued hog value weakness, modestly weighed on further by an increase in feed costs.  Farrow to finish feed costs in Canada were $0.40-$0.50/hog higher, while those in monitored US regions were up $0.20/hog on the week. 

Monitored Canadian hog margins faced significant weakness as hog markets stumbled on lower cash hog values with margins calculated $15-$21/hog lower than a week earlier. Margins based off the Sig 4 weakened the least, down $15/hog, while margins out of other CME-based markets were down $17-$18/hog from a week earlier. Hog margins based off the Sig 5 declined near $19.50/hog while those out of the WHE weakened the most, down $20.75/hog. In the US, Tyson hog margins were calculated $18/hog lower while JM margins were down near $20/hog.

US Regional Margins    

- Tyson $(0.83) USD X 1.3057 = $(1.08) in Canadian Dollars

- Morrell $(21.83) USD X 1.3057 = $(28.50) 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.