While the weaker Canadian dollar gives farmers less purchasing power, the stronger U.S. dollar puts more money into the farmer’s’ pockets when he sells his commodities, whether grain, special crops or livestock into the U.S. market and / or based off the Chicago markets.
Steve Meyer, the vice president for pork analysis with EMI Analytics expects the strength of the U.S. dollar to result in extremely strong live hog prices in Canada heading into 2016, despite higher U.S. slaughter numbers because the losses from Porcine Epidemic Diarrhea were much less than expected, U.S. pork producers will remain profitable.
Meyer predicts Canadian prices are going to be extremely strong, given the strength of the U.S. dollar going into next year.
“The dollar, the strength of the U.S. dollar, is certainly hurting us in export markets right now,” he said. “We’ve made everybody more competitive with the strength of the U.S. dollar. It’s strong relative to the euro, it’s strong relative to the Canadian dollar, it’s extremely strong relative to the Brazilian real, it’s even strong relative to the yuan given the devaluation of the yuan last week by China, and so that makes our products more expensive and that’s shown up.”
Meyer says the U.S. pork exports are down about five per cent so far this year and thinks that number is going to get smaller as the year progresses because of really poor exports last year and this year’s numbers could be about even with last year.
“That’s different than we were for about a 10 or 12 year period in the 2000s when we saw very rapid growth of exports,” he said. “I think that’s encouraging for Canada. Canada is going to be in a position to sell product to our customers and into the United States at a very competitive price because of this strong dollar and I don’t see that ending anytime soon.”
Dr. Meyer says there’s some talk about possible higher interest rates but doubts that will happen anytime soon. Higher interest rates will further strengthen the U.S. dollar, and that’s one of the reasons the fed will probably not be making much of a move on interest rates, at least in the foreseeable future.
In another positive scenario for hog producers is that of China’s hog losses according to hog commentator Jim Long.
Media reports show a new Rabobank report estimates the culling of nearly 100 million head of hogs in the Chinese herd and another 10 million breeding sows over the last 18 months is the equivalent of the entire North American hog industry disappearing altogether.
The agricultural bank and research firm examined the implications of China’s moves on the global hog and pork industries and believes that the effects will linger throughout 2015 and 2016.
Long says with those kind of big moves, Chinese pork production could drop to 6.5 per cent in 2015, to 53 million metric tons, Rabobank reports, with U.S., Canadian and European pork processors ultimately benefitting from the increase in demand.
“100 million less hogs re: Rabobank ÷ 52 weeks = 2 million head per week,” he says.  “Rabobank is projecting 600,000 metric ton increase in imports the last half of 2015.  Our farmer arithmetic is 22 hogs at 100 kg carcass per tonne.  22 hogs x 600,000 tonnes = 13.2 million market hog carcass equivalent.  Half a year = 26 weeks.  13.2 million Hogs ÷ 26 weeks = 500,000 hogs per week.”
Long says if his farmer arithmetic is correct that is the market move for Europe and America meaning 300,000 head out of EU per week, 200,000 head per week from America – that is big, big, big!  Not only will it cut domestic supply pushing prices higher but be the psychological boost the market needs.  •
— By Harry Siemens