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Market Commentary: Wednesday, July 15/20

Transcript

Hog futures are trading lower in a narrow range. The concern for most traders and market watchers is that even though prices may not test new lows in the near future, there is limited support to aggressively draw buyers back into the market. This could continue to keep prices hovering within the current range around or below the $50 per cwt through much of the summer. Deferred contracts have shifted lower in limited activity as growing tensions with China once again are putting more pressure on the ability to sustain and grow long term pork demand with the country, despite trade agreements already in place. 

Cash hog bids are expected 50 cents lower to 50 cents higher with most bids expected steady to 30 cents higher. Prices are lower on the National and higher on the Iowa Minnesota morning reports.  The morning cutout value is higher. 

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

For the week ending July 17, the Western Hog Exchange OlyWest 20 weekly price is $1.096/kg dressed, the OlyWest 21 weekly price is $1.415/kg dressed, and the BP4 floor price is $1.40/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange. 

Weekly Regional HOG PRICE Report

 


Things to Consider….

As the market enters the back half of 2020, a quick review of the first 6 months of the year can help to put things into perspective.     Early expectations for 2020 were to see strong demand and improved exports to ease rising supplies, however although the exports did materialize, a massive glut of pigs and sharply low cash prices were the result due to slaughter plant closures linked to the spread of the novel coronavirus.

Pork values as shown by the USDA Cut-out went for a roller coater ride from mid-Mar to  early June and have now settled below the 5 year average.  The good news…….it appears the cut-out has bottomed (for the time being).  The bad news……pork values are still at the lowest price in half a decade for this time of year.  Pork values were lower earlier this year, but for mid-summer pricing, meat values are weak.  

Hog numbers remain high.  Although liquidation has been a buzz word since the start of 2020 and more widely heard since March, the latest Hogs and Pigs report still suggest a pig crop from Mar-May at 1.4% above the previous year compared to expectations of a 3% drop.  The last report was not what the industry was looking for, in the way of a spark and snuffed out much of the hope of a summer rally linked to supplies. 

US slaughter has returned to normal levels and packers have made good progress in cleaning up backed up hogs.  Weights continue to trend seasonally lower and slaughter is expected to run above year ago levels for the foreseeable future.  The good news…….which may surprise some, year to date US slaughter for 2020 reached 65,221.1 Million after 27 weeks compared to last year when the US killed 64,918.3 Million hogs over the same number of weeks.  So even with the SHARP decline in kill levels from Mar to early June, the US has slaughtered more hogs then the previous year.

Some things are beginning to return to normal.  Cash prices have stopped dropping and futures appear to be flat lining.  Major upside is not expected in the short-term however each day brings more news of potential positives.  Time will be the factor to help push through the current situation.


June 30, 2020


Weekly Hog Price Recap

US regional and national cash hog values were mixed to weaker, with Tuesday and Thursday improvements offsetting a good portion of declines remaining days. CME cash varied as well however was primarily weaker amid more moderate daily moves. Pork cutout managed to climb $0.37/cwt over last Friday as many wholesale pork primal values improved on the week, excluding loin and belly values.


Monitored Canadian hog markets generally fell $4 to $9 per hog from week ago levels. Values out of the OlyW and BP/TCP declined the most, down $9 and $6.50 per hog respectively. The ML Sig 4 declined $5.50/hog, values out of Ontario and Hylife were each down more than $4/hog and Quebec was more than $3.50/hog from week ago levels. In the US, values out of Tyson declined $5/hog while JM fell $0.65/hog from a week earlier.

Weekly Hog Margins

Hog margins continue to weaken, trending lower over the course of the last month and a half. Lessened feed costs fell again this past week helping offset declines in hog values, with farrow to finish feed costs down more than $1/hog on either side of the Canadian/US border.


Hog margins out of Quebec remain the least weak compared to other monitored margins, down more than $2/hog on the week to $9/hog losses. Margins off the Sig 4 weakened $4/hog to $30/hog losses, while Hylife weakened near $3/hog to $34/hog losses. The OlyW fell more than $7.50/hog to near $36/hog losses, while margins out of Ontario were down $3/hog to nearly $47/hog losses. In the US, Tyson fell $3.50/hog to $51/hog losses while JM managed to improve $0.50/hog from the previous week to $58/hog losses.

US Regional Margins

  • Tyson: $ (51.01) USD X 1.3622 = $ (69.49) in Canadian Dollars
  • Morrell: $ (57.91) USD X 1.3622 = $ (78.89) 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.