The hog prices, feed prices, supply and demand, and of course the dreaded PED virus keeps the game interesting and not for the faint at heart. In Manitoba, there is one other caveat, that of the moratorium, meaning ban on any hog expansion, and in the rest of the world, finances, and high construction costs all add to this interest.
Tyler Fulton, director of risk management with h@ms Marketing Services in Headingly, MB says, despite the recent slide in live hog prices, Canadian pork producers can expect to remain profitable for at least the next four to six months.
Through August and the first week of September cash hog prices in Canada dropped by close to $50 per 100 kilograms, then gained some, only to slide back down.
Fulton says with the slight recovery, prices are well below the highs in early July, all relating back to the U.S. supply, and the impact PED losses in March and April are having on slaughter levels today.
“Over the last several months the U.S. slaughter has been averaging about six per cent fewer hogs than last year and that’s a pretty significant year over year change,” he says.
Fulton says in some recent weeks, the deficit ran at 10 per cent, but larger carcass weights, sometimes four and five per cent larger offset the fewer hog numbers dropping the net pork production weekly closer to three to four per cent less than last year. A four per cent drop in pork supply can realize changes of even 15 to as much as 20 per cent in prices.
“While it’s not what it was in July, hog profitability is still very good,” he says. “Hog prices are still the highest ever at this time of year so the combination of high hog prices and relatively low feed costs will result in really good profitability for at least the next four to six months or so.”
Hog commentator Jim Long says during the week of Sept 15, the U.S. marketed 2,050,000 hogs down 128,000 from the same week a year ago. Feed cattle marketed were down 60,000 head from the same week a year ago.
“Absolutely a huge drop in marketing per head of red meat, the only thing keeping prices from a huge explosion is the heavier year over year carcass weights of cattle and hogs,” said Long. “Feed prices continue to move downward. If PED hits even close to what happened last winter, hog prices relative to fed prices will allow profit margins per head well over $60 per head over the next twelve months.”
Dr. Ron Plain, an agricultural economics professor with the University of Missouri says record high retail pork prices have slowed pork sales at a time of year when the number of hogs available for slaughter goes up, fueling a sharp decline in both pork and hog prices.
“Seasonally we’re going to continue to see increases in pork production. It’s just a seasonal business,” said Plain. “We slaughter more hogs on a daily basis in the fall than we do in the summer, so pork production is headed up. We also, though, expect fairly sharp declines in retail prices.”
He says that should boost the amount of pork that’s moving through grocery stores and the demand for pork.
“We were looking at record profits, over 100 dollars per head in mid-summer for hog sales.
We’re down under 50 dollars per head now,” says Plain. “We’re still profitable and expect to remain so for the rest of this year and well into 2015 but we’re probably going to spend more time in the range of 25 to 50 dollar a head profit than in that 75 to 100 dollar range we were for a while this spring and summer.”
Dr. Plain says it looks like a record corn harvest will keep production costs down and U.S. pork exports keep doing well. Hong Kong, Japan and Mexico have been strong buyers and hopefully that strong foreign demand will continue. •
— By Harry Siemens