Market Commentary: Tuesday, May 11/21

Transcript

Hog futures are trading lower even though the market's fundamentals are positive. With cash prices higher, packers are buying up hogs and have intentions to run chain speeds so long as they have the pork to process. With hog futures lower and the market's fundamentals higher, it's a reminder that when the prices get as lofty as they are, choppy up and down trade is expected.

Cash hog bids are expected steady to higher. Cash prices are higher on the National morning report and the morning cutout value is also higher.  

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

For the week ending May 14, the Western Hog Exchange OlyWest 20 weekly price is $2.41/kg dressed, the OlyWest 21 weekly price is $2.40/kg dressed, and the BP4 price is $2.28/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange.

Weekly Regional HOG PRICE Report

 

Things to Consider….

As lean hog futures continue to rally to multi-year highs a quick look at current pork stocks and supply is timely to determine the validity behind such positive pricing levels. 

US Cold Storage reported pork stocks at 451.8 million pounds for March, down -6.5% or 31.6 million pounds under the previous report with current levels 165.2 million pounds or -26.8% under last year. For reference, total pork in cold storage for February was revised from 491.5 to 483.4 million pounds. 

Most pork categories reported decreased volume in cold storage for March. Total hams declined the most on the month, dropping 31.5 million pounds or -34.2% from February in a seasonal move however current stocks are 27.6 million pounds or -31.3% under year ago levels. Typically, hams in cold storage start to increase seasonally in April and continue trending higher to peak in September. Picnics in cold storage were 218 thousand pounds lower for March, with current stocks -2.8% under February levels and -30.2% or 3.3 million pounds under last year. Bellies were down 2.3 million pounds or -6.1% for March, bringing current stocks -54.9% or 42.9 million pounds lower than last year.

Spare ribs increased the most compared to other pork categories, up 8.1 million pounds or +8.6% from previously reported and -23.5% or 31.2 million pounds under last year. Loins in cold storage were up 3% or 1.4 million pounds from February, as bone-in loins climbed 5.6 million pounds while the boneless variety declined 4.3 million pounds for March.

Based on current US Federally inspected slaughter which is trending just above the 2018 and 2019 levels, supplies are being more then offset with elevated export volumes and domestic consumption.  The graph above illustrates that in 2018 and 2019 cold storage was around 600M pounds with less slaughter and now today in 2021, there is roughly 450M pounds in cold storage with higher slaughter. Exports are the main reason for the decline in supplies which based on recent news from China this week on more ASF, is not likely to soften any time soon.

Lean hog futures are expected to continue firm for the summer months and early fall.  Major price adjustments would only be expected in a major shift in demand occurs.     Supply numbers are not expected to change for at least 1 full hog cycle which would mean at the earliest more hogs could be expected in the summer of 2022.

  April 27, 2021



Weekly Hog Price Recap

Cash hogs recorded significant improvement again this past week with stronger rises mid-to-late week, particularly in regional cash. CME cash also improved daily with better gains mid-to-late week, however improved at a more moderate pace. Despite many pork primals reporting mixed to lower values during the week, wholesale pork values averaged above the week previous and pork cutout rose $2.25/cwt overall.  



Market hog values were generally up $4-$6 per hog on the week with those out of Ontario up the most, more than $6.50/hog higher. Hylife hog values rose $5.50/hog, followed by the Sig 4 which was up $5.25/hog. Hog values out of Quebec were up shy of $5/hog, while BP/TC and the OlyW 20 were each up more than $4.50/hog and the OlyW 21 was up $3.25/hog. In the US, Tyson jumped $10.25/hog while JM rose $9.25/hog from week ago levels.

Weekly Hog Margins

Hog margins generally improved on continued strength in hog and pork values, however were considerably offset by a surge in feed costs. Canadian farrow-to-finish feed costs surged $3.75/hog while feed costs in the monitored US region jumped closer to $3.25/hog from week earlier.

Hog margins of the OlyW 20 continue as the strongest north of the border, up more than $0.75 to $70.75/hog profits. Ontario strengthened near $2.75 to more than $66.25/hog profits, while Quebec margins improved $1 to nearly $60.75/hog profits. ML Sig 4 margins improved $1.50 to $54/hog profits while those out of Hylife strengthened $1.75 to $52.25/hog profits and the OlyW 21 weakened $0.50 to $49/hog profits. In the US, Tyson hog margins strengthened more than $7.50 to $81.25/hog profits while JM margins were up $6 to nearly $76.25/hog profits from a week earlier.

US Regional Margins

  • Tyson: $ 81.31 USD X 1.2521 = $ 101.81 in Canadian Dollars
  • Morrell: $ 76.30 USD X 1.2521 = $ 95.54 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.





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