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Market Commentary: Thursday, November 14/19

Transcript

Hog futures are trading lower at midday. The general tone of hog futures trade remains weak following a strong pullback in nearby hog futures midweek. Little has changed fundamentally in the market as there is still no strong indication of where things stand with the progress of the partial trade deal. The question of tariffs continues to be a major issue, but it is uncertain just how much movement President Trump will make in relation to tariffs in order to make long term changes in trade. Sometimes the fact that tariffs are a result of the trade war and not the cause of it has been lost through the process.

Cash hog trade is called steady to $1 lower; most bids are steady to weak. Prices are higher on the National and lower on the Iowa Minnesota morning reports. The morning cutout value is lower. 

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

For Thursday, November 14 the Western Hog Exchange OlyWest 19 base price is $1.450/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange. 

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Weekly Regional HOG PRICE Report

 


Things to Consider….


Since lean hog futures peaked in mid-October, the market has experienced mainly range-bound trade.  Weakness in late October was met by steady to firm futures over the last couple of weeks as news articles continue to point towards improving US and Canadian pork exports into 2020 and beyond.

As illustrated by the lean hog contracts shown here, summer 2020 and beyond have been more responsive to the news due to a lengthier period of time for things to develop.  Although export news has been positive amongst massive slaughter numbers, it is unlikely to see December move much higher with only 4 weeks left until expiry.     Without a major surge in cash markets, Dec lean hogs are destined to expire in the mid $60’s US per cwt.

April 2020 and June 2020 on the other hand have appeared to register a short-term bottom and were not forced to close the gap established on September 12 and 13th.  Commonly futures markets will work there way through the low end of the gap before resuming the trend but in the case of spring and summer lean hogs, it appears, at least for the time being, that the gap will continue to remain in place with prices trading steady to firm since the beginning of the month.

According to a report released this week by food consults Gira for the US pork industry, pork exports to China are forecast to remain high through 2025.  The report also predicted that the peak would come in 2022 and that China would recover from the outbreak of ASF by 2027.     Although these dates are only estimates and predictions they do support long-term pricing models in the coming years.  

Major changes by Tyson and JBS to no longer accept hogs with Paylean (Ractopimine) signals the need and desire for all companies to export to China.  

Currently, there still appears to be tops in the market and should be used by producers in protecting some profits for 2020 however percentages in the coming year may be lower than previous years based on market optimism.

November 5, 2019





Weekly Hog Price Recap

Cash hog values declined another week with daily losses reported. Packer cash bid volume was considered mostly moderate to lower into the end of the week. CME cash also declined daily however at a more moderate pace. Wholesale pork values were mixed from a week earlier as lower bellies, loins and butts pushed pork cutout $0.18/cwt lower. 



Monitored Canadian hog markets were generally $5-$9 per hog lower, excluding values out of Quebec which declined near $2/hog. Values out of the Sig 5 fell the most, followed by the OlyW 19 which fell $7/hog. Remaining monitored Canadian markets such as those out of Ontario and the prairies were generally $5-$6 per hog lower. In the US, Tyson values declined shy of $9/hog while JM values declined $11.50/hog from a week earlier.


Weekly Hog Margins

Hog margins weakened on continued cash hog value declines and additional pressure from increased feed costs. Canadian farrow-to-finish feed costs rose $0.50/hog higher, while those out of the monitored US region edged $0.25/hog higher from week ago levels. 


Hog margins calculated out of the Sig 5 weakened the most on the Canadian side, down near $10/hog, followed by the OlyW 19 which weakened around $7.50 per hog. Margins out of Ontario, Hylife and the Sig 4 were $6-$7 per hog weaker, while those out of Quebec were down around $3/hog from a week earlier. In the US, Tyson margins weakened $8.50/hog while JM margins were calculated more than $11/hog weaker. 

US Regional Margins

  • Tyson: $ -7.71 USD X 1.3120 = $ -10.12 in Canadian Dollars
  • Morrell: $ -22.42 USD X 1.3120 = $ -29.42 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.