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Market Commentary: Monday, October 26/20


Hog futures are trading narrowly higher in most months after a lower open. Despite the rapidly expanding hog herd in China, demand has done well. December futures have been the recipient of the good demand while later futures contracts have reacted to the strong potential of slowing exports. The September Cold Storage report was friendly to some aspect of the market, but overall, it will need a positive injection of news to provide further support. The initial dropoff in hog futures appears to be related to a perceived increase in pork availability in US markets.

Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids $1 lower. Prices are unavailable on the National and on the Iowa Minnesota morning reports.  The morning cutout value is higher. 

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

For the week ending Oct 30, the Western Hog Exchange OlyWest 20 weekly price is $1.847/kg dressed, the OlyWest 21 weekly price is $2.064/kg dressed, and the BP4 price is $1.8269/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange. 

Weekly Regional HOG PRICE Report

Things to Consider….

As the cash hog market appears to be slowing down, lean hog futures have experienced some major sell pressure dropping sharply after registering contract highs in most trading months just last week. Nearby December lean hogs have faired the best in the near-term however traded down the daily limit mid this week.

As illustrated in the lean hog futures graphs 2021 contracts have been hit hardest losing as much as $5 US per cwt in just 5 trading sessions, which took nearly 3 weeks to put on.

Cash hog declines are partially to blame for the weakness in futures however another contributing factor is long liquidation by large speculative positions. The bar chart above quantifies the Commitment of Traders report over the last year. As can be seen, large specs started going long the hog market in a significant way around late June, early July. They continued to extend their long position until just recently when positions started to decline in and around the 3rd week of September. The decline of long positions also known as long liquidation signals that profit taking is happening and “funds/speculators” who were long the market have decided further upside it limited at this time and will exit the market to secure profits.

When the liquidation begins, it signals an opportunity for producers to act. Selling the market when the funds are extremely long is typically a good opportunity to take advantage of a market rally that has occurred. Over the last 4 weeks recommendations have been made for producers to begin protecting a portion of their production in what was an up-trending market. Although the highs have now passed, for the near-term, not all is lost, as expectations are still for prices to do well into the later part of 2020 and into 2021.

October 20, 2020

Weekly Hog Price Recap

Regional and national cash were mixed to lower with throughout the week, while CME cash improved much of the week however at more moderate daily moves. Wholesale pork values were generally higher, excluding butts and picnics, with pork cutout up $2.90/cwt over week ago levels.

Monitored Canadian hog markets climbed generally $0.50 to $2 per hog over the previous week. Values out of BP/TC improved the most, up $2/hog, followed by those out of Quebec and the OlyW 21 which were each up $1/hog. Ontario and the OlyW 20 each improved near $0.75/hog while the Sig 4 was up $0.50 and Hylife closer to $0.25/hog higher. In the US, Tyson edged $0.25/hog higher while JM fell $2/hog from the previous week.

Weekly Hog Margins

Monitored hog margins weakened on the decline in cash hog values and were further pressured by a rise in feed costs. Canadian farrow-to-finish feed costs rose nearly $2/hog while those in the monitored US region climbed closer to $1.75/hog from a week earlier.

Margins out of Hylife continue at strong levels however weakened $1.50 to $53.25/hog profits, followed by margins out of Quebec which edged near $0.75 to $44/hog profits. The OlyW calculated hog margins near $1 weaker to $33.75/hog profits out of the OlyW 20 and $29.50/hog profits on the OlyW 21. Ontario weakened more than $1 to $24/hog profits and the Sig 4 fell closer to $1.50 to $20.50/hog profits. In the US, Tyson margins weakened nearly $1 to $12.75/hog profits while JM margins fell nearly $3.75 to $4.50/hog profits.

US Regional Margins – Tyson $12.68 USD X 1.3174 = $16.70 in Canadian Dollars
                              Morrell $4.38 USD X 1.3174 = $5.77 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.