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Market Commentary: Tuesday, September 29/20


Hog futures are trading lower to sharply lower. The decline appears to be partially related to an easing of Chinese pork prices, suggesting that China is able to better supply its own pork needs. China also recently re-affirmed their commitment to become 95% self-sufficient in pork production. The pullback in price levels is most evident in December contracts with triple-digit losses, this is widening the October premium to nearly $10 per cwt and creating even more uncertainty through the entire complex. Aggressive short term buying in October futures is based on the expectation that active export business will be reported the next couple of weeks. But traders are much less confident about the ability to sustain demand growth beyond a few weeks. This is leading to active pressure in December through April futures as the industry will still be grappling with larger hog supplies and uncertain domestic and export demand growth.

Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Prices are lower on the National and on the Iowa Minnesota morning reports.  The morning cutout value is also lower. 

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

For the week ending Oct 2, the Western Hog Exchange OlyWest 20 weekly price is $1.776/kg dressed, the OlyWest 21 weekly price is $1.964/kg dressed, and the BP4 floor price is $1.7094/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange. 

Weekly Regional HOG PRICE Report


Things to Consider….

Pork cut-out has rallied to a seasonal 5-year high breaking $90 US/cwt, while hams approached $100 US/cwt which is not only a seasonal 5-year high but also an annual 5-Year high as shown in the second graph.  Hams which typically rally in the 4th quarter due to seasonal holiday buying are seeing price hikes sooner than normal as supplies become a concern for later this year. 

Earlier in 2020 pork cut-out rallied sharply to $120 US per cwt before collapsing to just above $60 US, where it traded for nearly a month.  But since the low established in the first week in July, pork has consistently put on value to now trade above the previous 5 years.  The first graph illustrates how the move has been somewhat counter-seasonal, at least during the second half of summer, but now could see further strength, as meat prices do rise from Sep to mid-November.

A combination of export demand and the threat of lessening domestic supply is fueling the pork market.  At a time of increased buying from major Asian importers, due to the ASF presence in Germany and resulting pork import bans, the quantity of pork in North America is destined to decline due to liquidation.  

The combination of firming demand and lower supplies is the fuel providing strength in the market today.  Do not be confused with this information adding strength later in the year.  The strength today is coming from this anticipation.  Any strength later in the year will need to come from new “news”.  Remember that the market knows everything we know before we know it.  If you heard a piece of news today, the market knew about it yesterday.  Lean hog futures are bouncing off contract highs across the board.  Producers are encouraged to do some forward pricing to reduce the potential risk of volatile prices in the coming 6-8 months.  

September 15, 2020

Weekly Hog Price Recap

Regional and national cash hogs improved for much of the week despite starting the week lower Tuesday. CME cash improved daily during the holiday shortened week, the stronger gains early on. Pork cutout rose $4.50/cwt from the previous week, carried higher as most primals reported significant increases excluding declines in butts and ribs.

Monitored hog markets improved on the week with those out of Quebec up the most, $19/hog higher. Hog values out of Hylife and Ontario also reported significant increases, up $13 & $12 per hog respectively while the ML Sig 4 rose more than $9/hog. The OlyW 20 climbed shy of $4/hog, due to its lagged base price. In the US, values out of Tyson rose $5/hog while JM improved $12.00/hog from the previous week.

Weekly Hog Margins

Hog margins strengthened this week on improved hog and pork values however were offset in-part by a rise in feed costs. Canadian farrow-to-finish feed costs climbed $1.50/hog while those in the monitored US region rose $1/hog from a week earlier. 

Margins out of Hylife and Quebec continue in positive territory, with values out of Quebec up nearly $17.50/hog to $17.25/hog profits and Hylife up $11.50/hog to more than $22.50/hog profits. Hog margins out of the ML Sig 4 improved nearly $8/hog to $7/hog losses, while the OlyW 20 strengthened more than $2/hog to $10/hog losses and Ontario margins strengthened $10.50/hog to $10.25/hog losses. In the US, Tyson margins improved $4.75/hog to nearly $22/hog losses while JM strengthened $11/hog to $17.75/hog losses.

US Regional Margins

  • Tyson: $ (21.86) USD X 1.3178 = $ (28.81) in Canadian Dollars
  • Morrell $ (17.72) USD X 1.3178 = $ (23.35) 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.