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Market Commentary: Thursday, February 21/19


Hog futures are trading sharply higher in all months. Buyer support is moving into the complex as traders look at the report of potential agriculture exports to China once a trade deal is done. There is no specific information available, allowing traders to speculate on future demand. This has pushed nearby contracts $2 to $2.90 per cwt higher at midday. The previous pressure in the market has left the market ripe for a market rally, which could lead to additional support even if trade deals are not revealed. 

Cash hog bids in early trade are expected to be steady to $1.00 lower; bids are scattered through the range. Prices are lower on the National and unreported on the Iowa Minnesota morning reports. The morning cutout value is higher.  

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

For Thursday, Feb 21, the Western Hog Exchange Olymel 17 base price is $1.235/kg dressed and the Olymel 19 base price is $1.262/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange. 

Weekly Regional HOG PRICE Report


Things to Consider….

With expanded limits and a second consecutive day of limit down trade in nearby contracts it can be said that the bottom has officially fallen out of the hog market.  April lean hogs settled nearly $4 US per cwt lower on Wednesday, following a $3 drop on Tuesday in 2 of the most negative days seen in the market in recent history.

The sharp decline in futures has been blamed on a rumour initiated on social media that African Swine Fever had been detected in Canada.  The rumour was quickly put to rest during midday trade on Tuesday however not before the market had done its damage.  And even after the rumour was proven to be false, the onslaught of selling continued today as sell stops were triggered on a technical collapse in the market.   

As illustrated in the graphs of lean hog futures most of the market’s negativity is being focused in the next 3-6 months while firm pricing is still being offered for later in 2019.  The December lean hog futures traded to a contract high of $64.45 per cwt last week while settling just under $63 today.     Reasoning for the firm market later in the year is the belief that China and other countries impacted by ASF will have greater demand for pork once they have gone through abundant short-term supplies due to accelerated slaughter.

With so much uncertainty in the market, hog producers are encouraged to use up any previously placed hedges or forward contracts in the weeks ahead to supplement prices during the current collapse.

As for adding to any potential risk management for 2019, spring and summer months have been devalued beyond cash expectations and should be avoided until some recovery is recognized.  Producers should pay close attention to fall and winter months of 2019 and begin to build a strategy for covering some production in that period.

February 19, 2019

Weekly Hog Price Recap

Cash hog pricing declined throughout most of the week, with regional pricing significantly weaker Friday on minimal volume. Cash bid volume for regional pricing was generally moderate, peaking Tuesday. CME cash weakened throughout the week, generally $0.20-$0.30/cwt lower daily. Wholesale pork primals also weakened throughout much of the week, dragging pork cutout $1.91/cwt lower from a week earlier.

Monitored Canadian markets continue to slide, generally down another $1.50-$3.50/hog this past week. Markets derived from 201-base pricing typically declined the least. Pricing out of Quebec was calculated $1.50/hog lower while those out of Brito/Thunder Creek 4, Hylife and the Sig 4 were each down near $2/hog. WHE 17 also saw values decline near $2/hog while those based off WHE 19 fell closer to $2.75/hog. Values out of Ontario declined the most north of the border, falling $3.50/hog. In the US, Tyson values were down near $4/hog while those out of JM declined near $3.25/hog.

Weekly Hog Margins

Continued losses in hog market values has dragged margins to levels reported a month earlier. Canadian margins were additionally pressured by a modest rise in feed costs, while those in monitored US regions were stable to slightly lower. Farrow-to-finish feed costs for Canadian markets rose near $0.40/hog while those in the US weakened a modest $0.10/hog.

Monitored Canadian hog margins were generally $2-$4/hog weaker, with margins calculated out of Ontario the weakest - $4/hog lower from last week. Margins out of Hylife and the WHE 19 were down near $3/hog while remaining margins were typically $2/hog lower. In the US, Tyson and JM hog margins each declined more than $3/hog.

US Regional Margins

- Tyson $(14.53) USD X 1.3269 = $(19.28) in Canadian Dollars                                

- Morrell $(23.16) USD X 1.3269 = $(30.73) in Canadian Dollars

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