h@ms is a hog marketing service provider representing Manitoba and Saskatchewan producers and put out a regular hams Market Commentary. On Wednesday, July 26 h@ms called the U.S. cash prices to open lower again following the same trend that started about ten days ago. “Packers have cut their bids for hogs by about five per cent over this time frame with this recent weakness following the wholesale pork market trend. Over the next four months, hog numbers are expected to grow close to 15 per cent, which will put pressure on wholesale pork prices,” said the commentary. “However, pork belly prices remain the wild card as they continue to hover near all-time record highs with demand still outpacing the supply by a significant margin.”

On July 18, Tyler Fulton, the Director of Risk Management with h@ms Marketing Services said a dramatic increase in U.S. hog numbers will signal a shift to lower market hog prices.

“I think that this week is looking to be a turning point in hog markets. It appears as though we put in, or the US has put in their tightest hog slaughter of the year preceding the July 4th holiday,” said Fulton.

He sees this as a trend change from what was a good sharply higher market over the previous month to maybe a little softer price just coming from those more abundant hog supplies.

“So we think that things aren’t going to completely collapse or anything like that but we think that we’re probably at the tipping point where the hog numbers are heavy enough, the packers will start to pull back some of their cash bids.”

Fulton in his analysis of the USDA quarterly hogs and pigs report on June 26 said the two main things of consequence; the breeding herd and the market hog numbers.

The report pretty much confirmed the idea that market hog numbers were going to increase by roughly four per cent over the course of the next four months or so. That was pretty much in line with expectations.

“But it is important to note a four per cent increase, that’s very large given the context of the hog market over the last 10 years. Really, this is second only to last fall in terms of percent increases. That explains I guess the big discount that the lean hog is trading at from the current cash market,” he said. “On the breeding herd side, it really just confirmed the beliefs of the industry anticipating the herd would grow about 1.5 per cent.”

Fulton said to put it in perspective, the average market hog growth on an annual basis was probably 1.5 per cent over the last 10 years. So this four per cent is greater than double what the typical growth is. That’s sizable. It’s a decisive move to larger numbers.

“It affects Canadian producers directly because our prices are a function of that US market and consequently, we’re going to be moving into a timeframe of lower prices by virtue of the abundant supply that are available across North America,” he said.

He said demand is arguably the saving grace coming in surprisingly strong.

“We’ve needed it to be really firm in order to maintain profitable hog prices. It has not disappointed as the export market has performed above expectations,” said Fulton. “But it’s hard to know exactly where the greatest influence is from. But domestic the market appears to be very strong. That’s helped us deal with these heavy supplies. So the question really is whether or not we can maintain this. There are certain segments of the export market that are also putting up great numbers but other portions like China for example that have really failed to materialize over the last two months.”

With the U.S. packers increasing is critical to a healthy market given these trends toward higher hog numbers in the US.

“I think it’s important to note that we likely wouldn’t be seeing this level of growth without the increased capacity,” he said. “A lot of this growth in hog numbers came as part of a larger plan with these integrated plans to grow their on processing capacity. So it’s kind of a chicken and the egg kind of question but there’s no doubt these added plants are critical to being able to deal with the really abundant hog supply. Hopefully we’ll be able to move through the third and fourth quarters of 2017 without too much trouble in dealing with these record high numbers. •

— By Harry Siemens