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Market Commentary: Monday, July 16/18

Transcript

Hog futures Limited activity is seen in hog markets with markets mostly lower and stuck in a narrow to moderate trading range at midday. Very limited support is seen through the entire complex. There is growing uncertainty that additional buyers will be willing to move back into the market, even though prices shifted higher late last week and cash markets are focusing on establishing a sense of stability through the next couple of weeks. 

Cash hog trade is called steady to $1.00 per cwt lower with bids scattered through the entire range. Cash prices are unreported on the National and on the Iowa Minnesota morning reports. The cutout value is lower. 

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

For Monday, July 16, the Western Hog Exchange OlyWest price is $1.827/kg dressed and the OlyWest plus price is $1.837/kg dressed. This is Kerrie Simpson reporting from the Western Hog Exchange.

Weekly Regional HOG PRICE Report

Weekly Regional HOG PRICE Report

Things to Consider….


Lean hog futures continue to react negatively as China imposed a second round of tariffs on US pork imports bringing the total tax value to 62%.In retaliation to US imposed tariff on Chinese goods, China imposed a second 25% tariff on pork, adding to the original 25% tariff put on in early April.The combined 50% tariff was added to a pre-existing 12% tariff that China had on US pork.Pork trade with China as shown in the graph to the right had been trailing 2017 by a small margin but was still considered a strong market for US pork.The remainder of 2018 is undoubtably going to be lower which we will see later this month when the May export numbers are released.


The result of this trade war is going to be sharply lower prices for US hog producers who are soon going to experience significant losses once cash prices begin to trade into the late summer and fall months.Canadian producers will also be in the same situation as base price calculations for cash are going to struggle due to the back log of pork and other proteins.Not only has China imposed tariffs on pork products but beef and poultry have also seen tariffs imposed which in turn will result in more backed up proteins in the North American market.


Pork Cut-out so far this year has traded below the 5-year average as shown in the graph to the right.Pork cut-out appears to have peaked for the year, and seasonally looks to trade lower into the 3rd quarter.Expectations are for pork values to grind lower for the next couple of months unless there is a disruption to the flow of pigs during the hot summer month ahead.In years of extreme heat, we have seen pork and pig prices rally in the late summer due to short-term supply shortages.Producers are encouraged to sell on the cash markets for the remainder of the summer and look to set targets for the 4th quarter of 2018 and 1st quarter of 2019 to reduce exposure to a potentially damaging end to the year.
July 10, 2018










Weekly Hog Price Recap
Regional cash started the week stronger, as packer demand to fill holiday-shortened week schedules helped pricing climb. The latter half of the week, pricing declined amid light volume.Regional cash volume was mostly moderate to start the week, lightening out as the week progressed. CME cash by comparison declined each day, more at the start of the week with lighter declines to end the week.




Monitored hog markets weakened on lower cash pricing during the holiday-shortened week. Additionally, Canadian markets received further pressure from the falling rate of exchange. Markets based off CME cash declined the most this week, falling $8-$9/hog. Hog markets based off regional pricing declined in the general range of $2-$5/hog. US-based JM pricing improved modestly while VMR-based Tyson declined near $8/hog.




Weekly Hog Margins
Farrow to finish feed costs offset weakness of hog margins partially, with Canadian farrow to finish feed costs falling close to $3/hog while costs out of the US declined near $2/hog.


Canadian hog margins weakened $2-$6/hog on the week, with slaughter-based markets such as the Sig 4, Hylife, Ontario and Quebec pricing down the most. Tyson margins declined $5.50/hog while those out of JM were calculated $3/hog higher.
US Regional Margins
- Tyson $43.72USD X 1.3133 = $57.42 in Canadian Dollars
- Morrell $42.15USD X 1.3133 = $55.36 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.

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