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Hog futures are trading moderately lower at midday. Moderate price shifts are likely to continue today as traders wrap up the week following a moderate-to-strong bounce off of long-term lows. With markets closed Friday due to the Easter weekend, and Monday trade following Easter traditionally sluggish, the focus on price adjustments and position squaring is likely to be high through most of the session. This could add increased end-of-the-week volatility in the complex, although in June contracts even limit losses at the end of the week would not shatter long-term support levels. But strong triple-digit losses today would create significant technical damage to the recovery efforts this week, leaving traders to re-question if a "market bottom" has been established.
Cash hog bids are called steady to $1 lower; most bids are steady to 50 cents lower. Prices are lower on the National and higher on the Iowa Minnesota morning reports. The morning cutout value is also higher.
The Canadian Dollar is trading higher against the US dollar at midday.
For the week ending April 10, the Western Hog Exchange OlyWest 20 weekly price is $1.492/kg dressed and the BP4 price is $1.6628/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange.
Things to Consider….
I hope this message finds everyone safe and well during these unprecedented times. As we all need to play our part in the fight against Covid-19, let’s remember to recognize the guidelines issued by Health Canada and Government Agencies.
As lean hog futures register major losses over the last 2 weeks, signs of US hog liquidation are beginning to show up based on data collected during early March.
The USDA's Quarterly Hogs & Pigs report was released Thursday, March 26th reporting declines in nearly all categories from the previous report (Dec) however above year-ago levels (Mar 2019).
All Hogs & Pigs as reported were 1,029 thousand head under the figure last reported, however 2,968 thousand over March of last year. Kept for Breeding fell 96 thousand from the figure for December, however, is 26 thousand over last year. Market hogs fell 933 thousand head from last quarter, however rose 2,941 thousand head from last year. The March pig crop climbed 1,571 thousand head over last year.
Pigs per litter reached a new high for the Dec-Feb period at 11, surpassing the previous high of 10.7 reached last year for the same period. For comparison, the highest figure published to-date was reported in September for the period of Jun-Aug 2019 at 11.11 pigs per litter.
With lean hog futures now near historical lows limited options are available for forward contracting. Cash prices, although sharply lower in the last number of days have been able to maintain reasonable value given extreme weakness in futures.
Disruption to the supply chain including both the impact of hog slaughter and processing or exports due to potential port closures are dominating the market. To date very few to no major US processors have been affected by the spread of Covid-19 however in Canada slaughter facilities in Quebec have been closed due to employees testing positive to the disease. The risk of more plant closures does exist which is reasoning for the major weakness experienced in the market at this time.
March 31, 2020
Weekly Hog Price Recap
Cash hog values reported significant improvements early in the week, while declines in the latter part were more modest in comparison and helped hog values hold well over the previous week. CME cash by comparison, rose daily but more moderately relative to regional and national cash hog values. Wholesale pork values weakened throughout the better part of the week however also managed to average over the previous week with pork cutout $2.86/cwt over week ago levels.
Monitored Canadian hog markets improved generally $12-$13 per hog from the previous week, excluding the OlyW 20 which rose near $17/hog and pricing out of Quebec which jumped more than $27/hog. The Sig 4 was up $12/hog, Hylife improved $12.50/hog and values out of Ontario rose closer to $13.50/hog. In the US, Tyson climbed $5.50/hog while JM improved more than $6.50/hog from the previous week.
Weekly Hog Margins
Monitored hog margins improved on strength in cash hogs, tempered in part by a rise in feed costs. Canadian farrow to finish feed costs rose $1/hog while those in the monitored US region climbed $1.50/hog from a week earlier.
Nearly all monitored hog margins rose into positive territory with only those out of the Sig 5 still negative, strengthening $10/hog to near $4/hog losses. Margins out of Quebec surged $26/hog to $30.50/hog profits, stronger by far than other monitored markets. Hylife hog margins improved $11.50/hog to $7.50/hog profits, and Ontario margins were more than $12.50/hog stronger to $5.50/hog profits. Sig 4 margins improved $11/hog to near $4/hog profits, while the OlyW 20 strengthened $15.50/hog to a profit of $1/hog. In the US, Tyson margins improved $4.50/hog to $1.50/hog profits while JM strengthened $5/hog to $0.60/hog profits.
US Regional Margins
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.
During what is now considered uncharted territory, lean hog markets have been significantly impacted due to uncertainty surrounding pork demand, supply chain disruptions and pig supply. It is important in times like these to recognize the risks but also keep in mind macro fundamentals that will eventually play back into the market once shock passes through the system. The information below continues to provide insight as to where the market is fundamentally rather than emotionally. US pork in Cold Storage reported for February increased from the month earlier but the increase was similar to seasonal gains seen in other years. The quantities reported in cold storage in February are prior to any major impacts felt by the spread of Covid-19 in North America, either positive or negative.
US pork in cold storage was reported at 661.7 million pounds for February, an increase of 36.1 million pounds from previously reported with most pork categories at increased quantities. Spare-ribs increased the most on the report, jumping 15.7 million pounds from January levels however remains a modest 984 thousand pounds under year ago levels. Trimmings in cold storage also increased significantly, rising 8.1 million pounds or up 15.3% from last reported and up 18.7% from February of last year. Total hams in US cold storage climbed 4.4 million pounds due to an increase in the boneless variety, however ham quantities in storage overall are currently 6.8% under levels reported for last year. By comparison, picnics in storage rose shy of 2 million pounds for February and are currently well over year-ago levels at nearly 86% higher than February last year, while butts were up 1.6 million pounds and are 9.4% over year ago levels. Bellies rose 3.5 million pounds in cold storage from levels last reported, and currently 38.3% over last year. Typically, total pork in cold storage tends to declined from February into March, as overall ham supplies take a dip ahead of Easter holiday ham purchases.
The release of March and April cold storage will be important to quantify the level of pork sold during the panic buying stage of the pandemic which began in mid-March. The next report expected in mid-April may provide some insight to consumer purchasing over the last 30-45 days.
March 24, 2020
Cash hog values improved for much of the week with the strongest daily gains reported midweek when packer cash bid volume was also reported at higher levels. CME cash by comparison, rose daily but more moderately relative to regional and national cash hog values. Additionally supportive, wholesale pork values improved daily and helped drive pork cutout $7.58/cwt over week ago levels.
Monitored Canadian hog markets improved generally $12-$13 per hog from the previous week, excluding the OlyW 20 which rose more than $9/hog and pricing out of Quebec which jumped $17.75/hog. The Sig 4 and Sig 5 each rose near $12/hog, while other markets such as Hylife and pricing out of Ontario were up around $13/hog. In the US, Tyson and JM values each climbed near $4.50/hog higher from the previous week.
Monitored hog margins improved on strength in cash hogs and a reduction in feed costs. Canadian margins were strengthened $14/hog on the week to $7/hog losses overall while US margins strengthened near $8/hog to $3.75/hog losses overall. Canadian farrow to finish feed costs fell $1/hog while those in the monitored US region declined $3/hog from a week earlier.
Margins out of Quebec strengthened the most and climbed to positive margins for the first time since the end of January, rising near $18.50/hog to $4/hog gains and is the only monitored margin in the green. Hog margins out of Hylife improved nearly $14/hog to $4/hog losses, while margins out of Ontario also improved $14/hog to roughly $7/hog losses. Maple Leaf margins each improved around $13/hog with the Sig 4 calculating $7/hog losses and the Sig 5 at $14.50/hog losses, and the OlyW 20 strengthened $10.25/hog to $14.50/hog losses. In the US, margins out of Tyson improved $8.25/hog to $3/hog losses while JM margins strengthened more than $7.50/hog to $4.50/hog losses.