American Hog News USDA

[Mustang Sally Farm]

US Hog Margins, 4 July 2012
05 July 2012

 

US - Margins deteriorated sharply over the past two weeks primarily due to soaring feed costs. Margins would actually have been even worse if not for a late month recovery in hog prices, particularly in nearby contracts, writes Doug Lenhart, General Manager of Genesus USA.

Projected hog finishing margins are now well below average as well as negative in both Q4 and Q1 following readings near or above the 90th percentile earlier this year.
 



Genesus Global Market Report
Prices for the week of June 24, 2012
 


Country

Domestic price
(own currency)

US dollars
(Liveweight a lb)
 


USA (Iowa-Minnesota)

97.91¢ USD/lb carcass

72.45¢
 


Canada (Ontario)

1.90¢ CAD/kg carcass

67.89¢
 


Mexico (DF)

21.23 MXN/kg liveweight

71.68¢
 


Brazil (South Region)

1.86 BRL/kg liveweight

42.37¢
 


Russia

95 RUB/kg liveweight

$1.32
 


China

13.49 RMB/kg liveweight

96.32¢
 


Spain

1.38 EUR/kg liveweight

78.72¢
 

A searing heat wave accompanied by drought has dimmed what earlier were bright hopes for this season’s corn and soybean crops especially in the Eastern Corn Belt. Crop conditions have declined steadily over the past few weeks and are now record low for this point in the growing season.
 
USDA released their June acreage and quarterly stocks reports this week, which pegged 1 June corn stocks at 3.15 billion bushels and final acreage at 96.405 million, up 541,000 from the March Planting Intentions. Soybean acreage was revised up 2.178 million from March to 76.08 million acres, with 1 June soybean stocks at 667 million bushels. All eyes are on weather though, and rainfall over the next two weeks will be critically important to stem a further decline in corn yield prospects.
 
USDA’s June All Hogs and Pigs report showed 1 June hog inventories up 1 per cent from last year and in line with expectations. June-Nov farrowing intentions were 1 per cent below last year, and the recent advance in feed costs may further discourage expansion.
 
The quick deterioration in forward profit margins has highlighted the importance of setting targets to scale into protection as the opportunities to do so can be short-lived.
 
3rd Qtr ’12 Most Recent Offering of $2.87, the low was $(0.30), the high has been $14.07 and the 5 year percentile of 50.5 per cent.
 
4th Qtr ’12 Most Recent Offering of ($5.34), the low was ($7.37), the high has been $7.19 and the 5 year percentile of 32.9 per cent.
 
1st Qtr ’13 Most Recent Offering of ($2.18), the low was ($3.78), the high has been $6.04 and the 5 year percentile of 36.0 per cent.
 
2nd Qtr ’13 Most Recent Offering of $3.84, the low was $2.83, the high has been $9.83 and the 5 year percentile of 34.1 per cent.
 
The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data. Please visit www.cihmarginwatch.com to subscribe to the CIH Margin Watch report.
 

[Mustang Sally Farm]

Weekly Roberts Market Report
27 July 2012



 Michael T. Roberts
 Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University


US - Corn exports were bearish at 19.6 mb vs. the 33.3 mb needed to meet USDA’s demand projection pace, writes Michael Roberts.

LEAN HOGS on the CME finished down on Monday. AUG’12LH futures finished $0.375/cwt lower at $93.325/cwt but $3.525/cwt lower than last Monday’s close. The DEC’12LH contract closed at $76.050/cwt; down $0.600/cwt. Losses swept the market on fears of record-high pork inventories. Heat was seen as stressing weight gains and viewed as supportive. However, slow processor demand offset support. The USDA cold storage report last Friday showed pork stocks still at record highs. Wholesale pork prices made small gains late last week.
 
CORN futures on the Chicago Board of Trade (CBOT) finished down on Monday. The SEPT’12 contract closed at $8.140/bu; off 10.5¢/bu. The DEC’12 contract closed at $7.854/bu; down 10.25¢/bu. Profit taking and prospects for wet weather were supportive. Exports were bearish at 19.6 mb vs. the 33.3 mb needed to meet USDA’s demand projection pace.
 
SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The AUG’12 contract closed at $16.984/bu; off 59.0¢/bu. NOV’12 futures closed at $16.222/bu; down 64.0¢/bu. Non-commercial position building pressured sell-off activity. Rain forecasts also pressured prices. Exports were neutral-to-bullish. Futures look bearish with so many long positions in place given there are only six reporting weeks left in the marketing year.
 
WHEAT futures in Chicago (CBOT) closed down on Monday. SEPT’12 wheat futures finished at $9.126/bu; off 30.5¢/bu. The JULY’13 contract closed at $8.104/bu; down 9.0¢/bu. CBOT wheat futures cut losses Monday following the corn market’s test of the upside. Both commercial and non-commercial bull position accumulation has driven prices. The market remains fundamentally bullish long term.
 

[Mustang Sally Farm]

Weekly Roberts Market Report
01 August 2012



 Michael T. Roberts
 Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University


US - The US House of Representatives is scheduled to vote this week on extending the current 2008 farm bill by one year in order to reinstate emergency drought and other aid for farmers and ranchers. Sources confirm that included in the proposal will be help for producers to deal with losses from widespread drought for corn and soybean production and elevated livestock prices, writes Michael Roberts.

House Agriculture Committee Chairman Frank Lucas (R., Okla.) said Saturday that drought assistance measures would be revived in a one-year extension of the 2008 farm bill by cutting funding for subsidy programs. The 2008 farm bill is set to expire on September 30, 2012 there is some doubt whether or not there is enough support in the House to pass a new 2012 five-year farm bill. The Senate passed its version of the new 2012 farm bill on 21 June, but the House leadership has yet to schedule a vote on its own version. Mr Lucas said he is trying to get a House floor vote on the new 2012 farm bill his committee approved on July 12 that would reduce spending by $35 billion over 10 years by cutting agriculture subsidies, food-stamp spending and other programs. Both bodies of Congress must pass a version and then create a unified bill before it can be signed into law.
 
LEAN HOGS on the CME finished up on Monday with the exception of the nearby August contract. AUG’12LH futures finished $0.650/cwt lower at $94.65/cwt and $1.325/cwt lower than last Monday’s close. The DEC’12LH contract closed at $80.00/cwt; up $0.700/cwt and $3.950/cwt over last report. Seasonal trends and spillover from commodity markets were supportive. Pit sources said they expected the drought and rising feed costs to push producers to cut back on production tightening supplies of hogs into next year. Slightly higher sow culling was noted. Prices for breeding stock were under pressure at a number of local and regional markets last week and again on Monday. Quotes for sows ranged $1-$3/cwt lower. Some plant schedules have been trimmed due to hot worker conditions. Average slaughter weights were down 4 lbs/hd from a week ago to 271 lbs/hd. Average weights have declined due to hot weather over the last two weeks and are expected to erode further for another week or two. According to HedgersEdge.com, the average packer margin was raised $3.65/hd to a negative $3.65/head based on the average buy of $67.66/cwt vs. the breakeven of $66.40/cwt. Monday the CME lean hog index was estimated at 96.04; down 0.02 and 2.01 lower week before last.
 


CORN futures on the Chicago Board of Trade (CBOT) finished up on Monday. The SEPT’12 contract closed at $8.200/bu; up 21.5¢/bu and 6.0¢/bu higher than last Monday’s close. The DEC’12 contract closed at $8.140/bu; up 20.75¢/bu and 28.75¢/bu over last report and established a new life-of-contract high. Continued drought concerns on dry forecasts amid uncertainty about the ultimate size of the crop were supportive. The drought categories of extreme and exceptional, as noted on the graphs below expanded 7 per cent last week. This is the highest level of drought affected acreage since 2003 and the largest weekly increase in the extreme and exceptional categories since Drought monitoring began in the US in January 2000. See US Drought Monitor graphs:
 






Reduced demand for US high-priced corn limited prices somewhat. Livestock industry representatives have asked the government to temporarily halt the ethanol-production mandate that forces much of the crop into fuel. While demand rationing is taking place strengthening inverse in futures spreads show that end users don’t believe it is enough to offset the expected large drop in production. Exports were bearish with USDA putting corn-inspected-for-export at 21.438 mb vs. estimates for 22-24 mb. This is well below the 35.5 mb needed to stay on pace with USDA’s 1.b bb demand projection. Please see graph.
 


The national average basis for corn fell 1.0¢/bu to -10.0¢/bu compared to September futures. Basis in Central North Carolina was +50.0¢/bu and in Virginia -16.0¢/bu. Late Monday afternoon USDA put the US corn crop in good-to-excellent condition at 24 per cent vs. 26 per cent this time last week and 62 per cent this time last year.
 
SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The AUG’12 contract closed at $17.256/bu; up 41.5¢/bu and 27.25¢/bu over last report. NOV’12 futures closed at $434/bu; up 41.75¢/bu and 21.15¢/bu higher than a week ago. Weather and traders adding risk premiums ahead of the USDA crop progress report were supportive. Soybeans are entering a crucial pod-setting/filling stage over the next few weeks. The crop is about two-weeks ahead of the normal production cycle due to early planting and heat stress. When plants are under stress they speed up the life cycle to reproduce before it dies. The National Weather Service forecasts mostly dry weather this week for the important soybean-growing states of Iowa, Illinois, and Missouri. High temperatures are expected to reach the upper 90s in Iowa and Illinois and low 100s in Missouri. Demand remains strong as China continues to import US soybeans due to low production in South America. Additionally, domestic soybean-meal demand for animal feed remains strong. Late Monday USDA put the US soybean crop in good-to-excellent condition at 29 per cent vs. 31 per cent last week and 60 per cent this time last year. The national average basis for soybeans fell 3.0¢/bu to -36.0¢/bu compared to August futures. Basis in Central North Carolina was -83.75¢/bu and in Virginia -61.75¢/bu. Exports were bullish. USDA put soybeans-inspected-for-export at 15.498 mb vs. estimates for 12-15 mb. Inspections are 78 mb ahead of the demand curve projected by USDA’s 1.34 bb for 2012. Please see graph:
 


WHEAT futures in Chicago (CBOT) closed up on Monday. SEPT’12 wheat futures finished at $9.144/bu; up 16.5¢/bu and 1.75¢/bu over last report. The JULY’13 contract closed at $8.316/bu; up 1.5¢/bu and 21.25¢/bu higher than last Monday at this time. Spillover from corn and soybeans was supportive. Wheat prices are somewhat linked to these as wheat is also an animal feed. In addition, damage to wheat crops in other countries is becoming more apparent. Wheat crop damage from drought is surfacing from Australia and the Black Sea region. Too much rain is reportedly hurting wheat-crop prospects in Europe. Funds continue to be bullish on wheat as global supplies shrink. The national average basis for HRW wheat was down 1.0¢/bu to -55.0 compared to September futures. Late Monday USDA put the US wheat crop in good-to-excellent condition at 63 per cent vs. 60 per cent last week and 70 per cent this time last year. Exports are considered bearish as USDA put wheat-inspected-for-export at 18.601 mb vs. estimates for 19 - 21 mb. This is 5.199 mb short of the 23.8 mb needed to stay on pace with USDA’s 1.2 bb demand forecast.
 

[Mustang Sally Farm]

USA Hog Markets
09 August 2012

 

US - Margins continued to weaken over the second half of July as feed costs moved steadily higher while hog prices failed to keep pace, writes Doug Lenhart.
 
One exception to that trend though has been in far deferred periods of 2013, where traders may be anticipating a more significant herd reduction due to the likelihood that sharply higher feed costs will stick in the new crop year. Forward margins remain at or below the 10th percentile through Q1 2013, and only about average from a historical perspective beyond that.
 
Crop conditions have been declining all summer, and now both corn and soybean condition rating indices are below 1988 for this point in the season. Analysts expect USDA to make another significant cut to their yield and production forecasts in the August WASDE report, with corn below 130 bushels per acre and soybeans under 40. Rainfall may still help to preserve soybean yield potential, and the next two weeks are seen as critical with the crop now moving through its pod-setting stage of development.
 
The hog market has been weak as the pork cutout is running about $10/cwt. or nine per cent below year-ago levels. Hot summer weather may be impacting grilling demand more than normal this season, and this in turn has limited strength in cash hog prices. Moreover, near to medium-term liquidation as producers cull herds in response to soaring feed costs may likewise pressure the market through the fall.
 
Producers continue to focus on the second half of 2013 as a combination of higher hog prices with a potential correction in the corn and soymeal markets may present the opportunity to protect margins at or above the 70th percentile.
 
3rd Qtr ’12 Most Recent Offering of $(12.81), the low was $(13.76), the high has been $14.07 and the 5 year percentile of 5.7 per cent.
 
4th Qtr ’12 Most Recent Offering of ($17.90), the low was ($19.23), the high has been $7.19 and the 5 year percentile of 2.3 per cent.
 
1st Qtr ’13 Most Recent Offering of ($9.94), the low was ($10.89), the high has been $6.04 and the 5 year percentile of 10.4 per cent.
 
2nd Qtr ’13 Most Recent Offering of $4.77, the low was $(0.45), the high has been $9.83 and the 5 year percentile of 41.2 per cent.
 
The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data. Please visit www.cihmarginwatch.com to subscribe to the CIH Margin Watch report.
 

[Mustang Sally Farm]

Weekly Roberts Market Report
15 August 2012



 Michael T. Roberts
 Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University


US - Corn futures on the Chicago Board of Trade (CBOT) closed down on Monday. The SEPT’12 contract closed at $7.826/bu; down 17.25¢/bu and 20.5¢/bu lower than last Monday’s close. The DEC’12 contract closed at $7.922/bu; down 17.0¢/bu and 12.75¢/bu under last report, writes Michael T. Roberts.

Grain futures were sharply lower with favorable growing weather, profit-taking, and short-covering weighed on prices. USDA’s World Agriculture Supply Demand Estimates (WASDE) report last Friday showed better-than-expected yields for soybeans and wheat which had spillover pressure on corn. A lower U.S. dollar was supportive. Pit sources said corn traded higher in early trading but couldn’t overcome spillover pressure from wheat and soybeans. Friday’s record high along with high volatility and no fresh news set the stage for corn futures correction on Monday. The December contract support is placed at $7.335, a price that is 33% lower than the uptrend high from the low of $4.99/bu set last May. According to USDA the U.S. corn crop in goodto-excellent condition remained the same from last report at 23% vs. 60% this time last year. The U.S. corn crop in poor-to-very-poor condition was lowered 1% to 49%. Exports were bearish-to-neutral with USDA putting corn-inspected-for-export at 22.276 mb vs. estimates for 21-23 mb. This was below the 30.2 mb needed to stay on pace with USDA’s 1.55 bb demand projection. Please see graph:




Corn basis was weaker even though USDA lowered fundamental projections for the 2012 crop. This was in reaction to lower demand from the livestock and ethanol sectors. The national average basis for cash corn was -8.0¢/bu under CBOT September futures, up 1.0 ¢ /bu. Mid-Atlantic corn basis was generally even with September futures.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed sharply lower on Monday. The AUG’12 contract closed at $16.562/bu; down 53.25 ¢ /bu but 48.75 ¢ /bu lower than last report. NOV’12 futures closed at $15.842/bu; down 44.5 ¢ /bu. Good growing weather, lower equity markets, and USDA’s latest WASDE report showed better-than-expected yields pressured prices. Soybeans started out of the gate under selling pressure on profit-taking and long-liquidation. Amid continued intense volatility the November 2012 contract could see a test of support between $15.562 and $15.222. The market is still bullish longer-term looking at the strong inverse in new-crop futures spreads. Exports were supportive with USDA putting soybeans-inspected-for-export at 15.698 mb vs. estimates for 12-15 mb. This was well above the 13.7 mb needed to stay on pace with USDA’s revised 1.35 bb demand projection. Please see chart:




Late Monday USDA put the U.S. soybean crop in good-to-excellent condition at 30% vs. 29% last week and 61% this time last year. The national average basis for soybeans was higher at +15.0 ¢ /bu vs. November 2012 futures. Good export activity and higher spot bids for loaded barges were higher. USDA cut the forecasted production for U.S. soybeans to 2.69 bb; below the average trade estimate.

WHEAT futures in Chicago (CBOT) closed lower on Monday. SEPT’12 wheat futures finished at $8.566/bu; down 28.5 ¢ /bu and 36.75 ¢ /bu lower than last report. The JULY’13 contract closed at $8.410/bu; down 11.0 ¢ /bu and 14.5 ¢ /bu lower than last Monday at this time. Momentum on speculatorlong-liquidation increased during the session on computer trading sparking a sharp sell-off. Longer-term the outlook is still bullish. Market volatility is doing nothing to help stabilize wheat prices. Exports were neutral-to-bearish with USDA putting wheat-inspected-for-export at 22.205 mb vs. estimates for 20-24 mb. This is 1.2 mb below the weekly totally needed to stay on pace with USDA’s 1.2 bb demand 3 projection. National average basis for Soft Red Winter wheat was placed at -56.0 ¢ /bu vs. September futures; Hard Red winter wheat -56.0 ¢ /bu vs. Kansas City September futures; and Hard Spring Wheat at - 83.0 ¢ /bu vs. Minneapolis September futures.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down on Monday. AUG’12DA futures closed at $17.61/cwt; down $0.03/cwt but $0.04/cwt over last report. The SEPT’12DA contract closed down $0.42/cwt at $18.75/cwt; and $0.37/cwt lower than a week ago. DEC’12DA futures closed at $19.27/cwt; down $0.27/cwt and $0.08/cwt lower than last week at this time. Class III futures established new highs last week but fell back on Monday. Aggressive cheese buying on lower cheese production and tighter cream stocks on increased butter churning were supportive. Milk production continues below last year at this time. Cow numbers are up but heavy culling continues so production is not expected to improve. Please see chart:




Cooler weather in many milk-producing areas is driving better production. The expected start of schools across the board will use up any increase in production which is expected to tighten some supply. Class III futures were: 3 months out = $18.56/cwt ($0.19/cwt lower than last report); 6 months out = $18.89/cwt ($0.15/cwt lower than a week ago); 9 months out = $18.81/cwt ($0.07/cwt lower than last Monday); and 12 months out = $18.78/cwt ($0.01/cwt over last report). This week variable cost of production for the average North Carolina conventional dairy producer with a 23,000 lb average is $23.42/cwt; $0.14/cwt lower than last report.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up Monday. The AUG’12LC contract closed at $121.825/cwt; up $1.225/cwt and $1.850/cwt over last report. DEC’12LC futures closed at $128.950/cwt; up $0.500/cwt and $1.825/cwt higher than this time last week. APR’13LC futures closed at $135.425/cwt; up $0.525/cwt and $1.275/cwt over last report. Strong demand, technical signals, and lower corn prices were supportive. Severe and expanding drought in the U.S and a demand drop in July pressured prices for weeks. The rebound in prices is across the supply chain. Late Monday 4 USDA put boxed-beef prices at $186.89/cwt; up $1.94/cwt and $8.40/cwt higher than last report. Cash cattle trade was quiet Monday. Packers who paid up last week are hoping futures will fall back this week and provide some relief. On Monday USDA put the 5-area weekly steer average at $119.50/cwt; $1.84/cwt over last report. Please see graph:




According to HedgersEdge.com, the average packer margin was raised $32.60/head to a positive $11.75/head based on the average buy of $118.53/cwt vs. the breakeven of $118.99/cwt.

 FEEDER CATTLE at the CME finished up on Monday. The AUG’12FC contract closed $1.975/cwt higher at $141.450/cwt; $3.025/cwt over last report. NOV’12FC futures closed at $145.222/cwt; up $2.375/cwt and $2.722/cwt higher than a week ago. Feeders rallied after corn futures fell for the second day in a row. Lower feed costs ease input costs at the feed yards which buy young stock and fatten them with grain consisting mostly of corn. For Monday 8.13.12; estimated receipts at the closely watched Oklahoma City market were put at 5,100 head vs. last week’s 4,811 head and 7,162 head this time last year. Feeder steers were $3-$5 higher while feeder heifers were $1-$3 higher. Steer calves were $2-$5 higher. Heifer calves were steady to $2 higher. Demand was very good for all classes, especially steer calves. According to some sources wheat grazers are getting ready for when it ever rains and wanted to have steer calves ready to go. For Monday 8.6.12; estimated receipts at the closely watched Oklahoma City market were put at 4,550 head vs. last week’s 4,496 head and 7,672 head this time last year. Heavy feeder steers (greater than 800lbs) were $2-$4 lower while those less than 800 lbs were steady to $2 lower. Feeder heifers were $2-$3 lower. Demand was moderate despite limited numbers. Steer and heifer calves were not tested. Several cattle were reported to be consignments from ranches where pastures caught fire recently due to heat lightening. Quality was considered plain on thin cattle.

LEAN HOGS on the CME finished mixed on Monday with nearbys up and remote deferreds down. AUG’12LH futures finished $0.075/cwt higher at $91.950/cwt; $3.225/cwt higher than last Monday’s close. The August 2012 contract will expire after Tuesday’s session. The DEC’12LH contract closed at $74.950/cwt; up $1.525/cwt and $2.050/cwt over last report. Lean hog futures were primarily supported by USDA’s emergency plan to help drought stricken producers. President Obama announced Monday that his administration plans to purchase as much as $170 million of pork, chicken, lamb, and catfish in an attempt to alleviate the burden put on U.S. farmers by drought and surging grain futures. The products are to be used for food aid programs. Technical signals and near-term seasonal demand expectations were also supportive. Cash hogs were quiet on Monday but some markets reported steady-to-$1/cwt lower prices. Late Monday USDA put the lean-hog-carcass cutout price at $92.36/cwt; down $0.33/cwt and $1.89/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin was raised $1.45/hd to a positive $4.15/head based on the average buy of $65.16/cwt vs. the breakeven of $66.72/cwt. The CME Lean Hog index for Monday; 8.13.12 was estimated at 92.80; down 0.49 and 1.38 lower than a week ago.

[Mustang Sally Farm]

Tyson Foods Shareholders Want Answers on Gestation Crates
17 August 2012

US - The Humane Society of the US has submitted a shareholder resolution requesting that Springdale, Ark-based Tyson Foods, which recently reported a 61 per cent drop in quarterly profits, to disclose to shareholders how it plans to meet the growing demand for pork produced without the use of gestation crates.

The recent decisions by McDonald’s, Burger King, Costco, Kroger, Safeway, Oscar Mayer and many other leading food companies to eliminate gestation crates from their pork supplies signal a reversal in a three-decade-old trend in the pork industry that leaves most mother pigs confined day and night in gestation crates during their four-month pregnancy.
 
These cages are roughly the same size as the animals’ bodies and designed to prevent them from even turning around. Mother pigs are subsequently transferred into another crate to give birth, re-impregnated, and put back into a gestation crate.
 
This confinement system has come under fire from veterinarians, farmers, animal welfare advocates, animal scientists, consumers and others.
 
“Despite its own largest customers demanding changes, Tyson continues allowing its suppliers to cram pigs in crates so small they can’t even turn around,” said Matthew Prescott, food policy director for The HSUS. “Tyson’s dwindling sales should be a wake-up call to the company that it needs to stop lagging behind its competition and customers on this important social issue.”
 
In addition to leading food companies, major pork producers have also announced plans to move away from gestation crates. Smithfield Foods, the world’s largest pork producer, and Hormel Foods announced they will be 100 per cent gestation crate-free for company-owned operations within five years and Cargill is already 50 per cent gestation crate-free.
 

[Mustang Sally Farm]

CME: Hog Futures Pulled Back Sharply
24 August 2012

 

US - Lean hog futures have pulled back sharply in the last two trading sessions as market participants worry about pork prices going into the fall, write Steve Meyer and Len Steiner.

 The nearby October Lean Hog contract closed on Thursday at $72.575/cwt, 323 points or 4% lower than just two days ago. This was a new contract low. The December contract also settled at a contract low of $70.6/cwt, about $10/ cwt lower than where it was at the beginning of the month. Hog supplies seasonally increase in the fall (hence the seasonal dip in prices) but the recent jump in hog slaughter rates caught some by surprise. Weekly hog slaughter is currently running about 6% ahead of last year’s pace. Producers have accelerated marketings as projected losses increase with each upward gyration in feed values. From corn to soymeal to DDGs to wheat, feed inputs are all sharply higher than a year ago and there is no benefit in waiting to bring hogs to market.
 
Part of the problem may be that producers slowed down marketings in July and early August, benefiting from the rally in hog prices and the rise in the price of key wholesale items (bellies, hams). Hog slaughter, based on weekly data, averaged about 1% below year ago in July. This was well under the 1-1.2% increase implied by the June hog inventory survey. The slowdown did not do producers any favors. As marketings declined and hogs spent a few more days on feed, hog weights responded and the results can be seen in the attached chart. Based on the latest MPR data, hog weights are now averaging almost 202 pounds per carcass, 2.2 pounds or 1.1% higher than a year ago. Pork supplies are currently running about 7% over year ago levels and this kind of increase has proved difficult for the wholesale markets to digest.
 
Prices for a number of items, from trimmings to hams to pork loins, are down sharply in order to clear the market. Trim values have taken a significant hit, wit the benchmark 72CL trim last priced at around 61 cents per pound, 15% lower than where it was trading last week. Hams, which tend to carry the carcass in August and September, currently are trading at 71 cents per pound, 10% lower than were they were a week ago and some 20% lower than a year ago. Even pork bellies, an item that was flying high for much of July and early August, have started to show weakness. Bellies account for just 16% of the carcass but their strong performance allowed to pork cutout to hold up until recently. Normally belly prices decline into the fall and with most other items also performing poorly, the fear is that the cutout could decline by more than previously thought.
 
Increasing sow slaughter rates will also add to the amount of pork coming to market in the coming weeks. Sow slaughter, reported with a two week lag, is currently running about 7-10% above year ago and some expect the liquidation to be even larger in the fall. This could add an additional 3 MM pounds of pork (carcass wt basis) to the weekly tally of pork production.

[Mustang Sally Farm]

CME: US Pork Exports Up 10 Per Cent
14 September 2012

 

US - Pork exports in July continued to track above year ago levels but the trend for much of the year has been towards lower export volumes, write Steve Meyer and Len Steiner.

It is likely that pork exports will be lower than a year ago in the second half of the year although the sharp break in US pork prices could encourage higher shipments to markets such as Mexico, which tend to be very price sensitive.

 Total US pork exports in July were 134,170 MT, up 1.4 per cent from a year ago. Year to date, US pork exports are up some 10 per cent from last year. Exports to Mexico in July were 33,024 MT, up 20.3 per cent from last year while shipments to Canada at 17,153 MT were up 14.6 per cent from last year. Exports to China/Hong Kong, which drove the growth in exports last year, have slowed down considerably and in July were pegged at 19,661 MT, less than half of what they were in late 2011.

 Japan has emerged as the top market for US beef and it may become an even more important customer should the Japanese government accept the recommendation of an expert commission and lift the cattle age requirement for US beef.

Total monthly US exports of fresh/frozen beef and veal to Japan in July were 17,130 MT, 16 per cent higher than the comparable month a year ago. This is also the largest monthly volume since December 2003. Despite the increase in volume, US shipments are much smaller than those of Australia to the Japanese market.

 In July, Australia shipped about 31,028 MT of beef to Japan. Back in 2003, US monthly beef shipments to Japan averaged about 25,000 MT a month while those from Australia averaged around 23,000 MT a month. But even as beef exports to Japan have been consistently on the rise, albeit with significant seasonality, shipments to other markets have struggled. High priced US beef and a stronger US dollar clearly remains an impediment to expanding beef exports to other markets, including markets in North America.

Canada is the second largest market for US beef. July beef and veal exports to this market were 15,432 MT, 31 per cent lower than a year ago. Indeed, in the first seven months of the year, US beef exports to Canada have declined some 10% from last year.

Beef exports to Mexico, once the top market for US beef, also are down. July volume was pegged at 10,225 MT, down some 21 per cent from last year and down 17% year to date. One market that has shown a dramatic decline has been Taiwan, with exports in July at just 172 MT, down 94% from last year. Concerns about ractopamine levels became a significant impediment to trade this year but the issue appears to be on a resolution path and new rules that specify acceptable levels are expected to come into effect in mid September.

 It will take some time for beef exports to this market to resume as trade will test the new rules before fully resuming shipments. The new Taiwan residue levels will be comparable to those in Japan and S. Korea. Total US beef exports in July were 76,385 MT, the largest monthly volume for the year but still some 15 per cent lower than a year ago.

[Mustang Sally Farm]

US: Hog Markets
27 September 2012

 

US - Margins fell further over the past month and remain extremely depressed from a historical perspective. Hog prices have been under pressure following heavy slaughter runs recently with increasing pork production. Recent weekly hog slaughter was near 2.44 million head which would be the largest in almost five years and only around 30,000 short of the all-time high set in 2007 at 2.47 million head. Hog weights have also been running above year-ago levels with year-to-date pork production up 2.25 per cent from 2011, writes Doug Lenhart.

High feed costs have led to notions that producers are in liquidation mode and culling herds, although gilt slaughter data from Ron Plain and Scott Brown at the University of Missouri call that into question. One fact is the recent press releases from Canada showing the 2nd and 4th largest producers (nearly 70,000 sows) are in financial disarray which could lead to some level of liquidation.
 
USDA’s September WASDE report raised corn ending stocks 83 million bushels due to larger carryover from the 2011/12 crop year and a smaller yield reduction than was expected. The national corn yield was lowered 0.6 bushels per acre to 122.8 while harvested area was left unchanged at 87.4 million acres. Corn has generally been under pressure since the middle of August, while soybean meal prices remain firm. Soybean ending stocks were left unchanged at 115 million bushels, with production down 58 million bushels from August due to a lower yield now projected at 35.3 bushels per acre. Crush was reduced which will further tighten meal supplies in the new crop year and keep prices well supported.
 
Many US producers continue monitoring deferred marketing periods where margins are stronger while evaluating adjustments to existing protection in nearby periods. In particular, adding flexibility to hog strategies that will allow for both increased protection to lower price levels and opportunity to participate in higher prices has been a focus recently.
 
4th Qtr ’12 Most Recent Offering of ($20.54), the low was ($25.00), the high has been $7.19 and the five year percentile of 2.8 per cent.
 
1st Qtr ’13 Most Recent Offering of ($12.12), the low was ($15.45), the high has been $6.04 and the five year percentile of 6.1 per cent.
 
2nd Qtr ’13 Most Recent Offering of $2.87, the low was $(0.45), the high has been $9.83 and the five year percentile of 29.5 per cent.
 
3rd Qtr ’13 Most Recent Offering of $3.84, the low was $3.42, the high has been $4.53 and the five year percentile of 58.3 per cent.
 
The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data. Please visit www.cihmarginwatch.com to subscribe to the CIH Margin Watch report.

[Mustang Sally Farm]

US: Hog Markets
27 September 2012

 

US - Margins fell further over the past month and remain extremely depressed from a historical perspective. Hog prices have been under pressure following heavy slaughter runs recently with increasing pork production. Recent weekly hog slaughter was near 2.44 million head which would be the largest in almost five years and only around 30,000 short of the all-time high set in 2007 at 2.47 million head. Hog weights have also been running above year-ago levels with year-to-date pork production up 2.25 per cent from 2011, writes Doug Lenhart.

High feed costs have led to notions that producers are in liquidation mode and culling herds, although gilt slaughter data from Ron Plain and Scott Brown at the University of Missouri call that into question. One fact is the recent press releases from Canada showing the 2nd and 4th largest producers (nearly 70,000 sows) are in financial disarray which could lead to some level of liquidation.
 
USDA’s September WASDE report raised corn ending stocks 83 million bushels due to larger carryover from the 2011/12 crop year and a smaller yield reduction than was expected. The national corn yield was lowered 0.6 bushels per acre to 122.8 while harvested area was left unchanged at 87.4 million acres. Corn has generally been under pressure since the middle of August, while soybean meal prices remain firm. Soybean ending stocks were left unchanged at 115 million bushels, with production down 58 million bushels from August due to a lower yield now projected at 35.3 bushels per acre. Crush was reduced which will further tighten meal supplies in the new crop year and keep prices well supported.
 
Many US producers continue monitoring deferred marketing periods where margins are stronger while evaluating adjustments to existing protection in nearby periods. In particular, adding flexibility to hog strategies that will allow for both increased protection to lower price levels and opportunity to participate in higher prices has been a focus recently.
 
4th Qtr ’12 Most Recent Offering of ($20.54), the low was ($25.00), the high has been $7.19 and the five year percentile of 2.8 per cent.
 
1st Qtr ’13 Most Recent Offering of ($12.12), the low was ($15.45), the high has been $6.04 and the five year percentile of 6.1 per cent.
 
2nd Qtr ’13 Most Recent Offering of $2.87, the low was $(0.45), the high has been $9.83 and the five year percentile of 29.5 per cent.
 
3rd Qtr ’13 Most Recent Offering of $3.84, the low was $3.42, the high has been $4.53 and the five year percentile of 58.3 per cent.
 
The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data. Please visit www.cihmarginwatch.com to subscribe to the CIH Margin Watch report.


To find out more about Genesus Genetics, please take the time to visit their website at www.genesus.com .

[Mustang Sally Farm]

CME: WASDE Report Holds Little Relief for Producres
12 October 2012

 

US - The latest USDA WASDE report offered little relief for livestock and poultry producers, write Steve Meyer and Len Steiner.

Key corn supply numbers came in below pre-report estimates. More importantly, the report dispelled an expectation that was building in recent weeks that yields would be higher than earlier projected. Some analysts were pegging the yield as high as 127 bushels per acre, about 5 bushels higher than what USDA reported. The October yield was pegged at 122 bu/acre, which in itself implied a 70 million bushel reduction in output. However, USDA increased the number of planted acres and harvested acres (per FSA certified data), leaving output down just 21 million bushels from the September forecast. One of the biggest changes in the report was one which was already known. Carryover stocks are down 193 million bushels, reflecting the latest data from the quarterly grain stocks survey. USDA offset some of the reduction in available supply by lowering its estimate of US corn exports by 100 million bushels. Currently USDA projects US corn exports for 2012/13 at 1.150 billion bushels, 25.5% smaller than a year ago.

USDA did not change its estimated ethanol and feed demand from the September report. Feed use is still expected to be down 9% from the previous year while ethanol use is expected to be down 10%. It remains to be seen if current corn prices are enough to force these kinds of cutbacks in livestock and energy demand for corn. At this point, USDA projects reductions in the production of all three main meat proteins. Beef production for 2013 is currently pegged at 24.726 billion pounds, 3.7% lower than a year ago. US beef production for the period Q4 2012 - Q3 2013 (corresponding to the corn marketing year) is projected to be down 3.3% from the previous year. Pork production for all of 2013 is projected at 23.017 billion pounds. This is about 95 million pounds larger than what USDA projected in September but down 1.3% from a year ago. The upward revision came despite reports that producers may be aggressively reducing their breeding herds.

Indeed, for the period Q4 2012—Q3 2013, USDA pork production is down just 0.2% from the previous year. Broiler production is expected to decline further, down 0.8% from a year ago following a 1.3% reduction in 2012. Still, looking at output projections for Q4 2012 - Q3 2013 USDA expects broiler production to decline 1.3%. Those that hold a more bullish view of the corn market point to these kinds of reductions in meat production and conclude that feed demand may not decline as much as what the USDA balance sheet indicates. And with current corn ending stocks at minimum pipeline levels, something will have to give. Ethanol could decline further but that will likely require lower crude oil prices. There is talk of higher corn imports, which could end up hitting 100 million bushels but still too small to make a dent. In the end, livestock producers could be squeezed further in order to force bigger production cutbacks.

[Mustang Sally Farm]

First-Ever US-China Hog Summit Held
19 October 2012

US and CHINA - The US Grains Council marks its origin with the "hog lift," an initiative to help rebuild the Japanese swine industry after a devastating typhoon that struck Yamanashi Prefecture in 1959. Since that time, boosting our international partners' livestock industries has been a core strategy for developing markets for US feed grains. That strategy remains vital today.

 China is among the many countries in which this strategy has been adopted. Most recently, in an ongoing effort to facilitate the increasing modernization of China's hog industry, the US Grains Council partnered with the US Meat Export Federation, the US Embassy in China, China Animal Agriculture Association and Center for Chinese Agricultural Policy, Chinese Academy of Sciences to host the first ever US-China Hog Summit.
 
While the Council has been active in China for over 30 years, this year's Summit was a direct follow up to the US-China Agricultural Summit held in Iowa in February 2012. China's hog industry is experiencing rapid centralization and industrialization. The Summit provided a unique opportunity for continued discussion of key issues including waste and disease management as well as health and food safety.
 
The growth and development of China's hog industry is among the major forces affecting not only world commodity markets, but also China's ability to remain self-sufficient in food and feed grains, environmental sustainability, and food safety issues in China. These three topics were the key focuses of the Summit, and are among the pillars of the US-China agricultural relationship.
 
Many people in China view food self-sufficiency as equivalent to food security. However, the Council believes that trade can help provide more food security by ensuring adequate supplies of low cost food to the low-income consumers in China.
 
"The definition of food security is changing. In the past the emphasis has been on providing sufficient food for adequate intake of calories to maintain effective energy levels. But increasingly the emphasis is on adequate intake of micronutrients, in addition to calories, to maintain effective energy levels and overall mental and physical health," said Dr. Bryan Lohmar, USGC director in China, during the Summit.
 
"The Council is proud of the role it has played in the modernisation of China's hog industry over the last 30 years," said Dr Lohmar.
 "The Council established China's first feed mill producing modern pre-mixes in 1984 and ultimately donated that mill to the provincial Agriculture Bureau. The Council has sponsored hundreds of participants in technical and market study tours and seminars over the last three decades, and been a reliable partner providing information to help China's feed and livestock producers improve their operations, and trading and processing companies negotiate the market."

[Mustang Sally Farm]

Target to Eliminate Controversial Pig Cages from Pork Supply
02 November 2012

US - The Humane Society of the United States has applauded Target – the nation’s fourth-largest food retailer with nearly 1,800 locations in 49 states – for wielding its immense purchasing power to make a huge improvement in animal welfare by eliminating controversial pig gestation crates from its pork supply chain.

“Target is committed to working with our vendors on the elimination of sow gestation crates by 2022,” states the company on its Responsible Sourcing website. “Target recognizes this task will involve a large undertaking from our pork product vendors and we will partner closely with our vendors as they work through this transition.”
 
The Humane Society of the United States supports Target’s progress.

“Target’s got gestation crates in its crosshairs and should be commended for working to improve conditions for pigs in its supply chain,” stated Matthew Prescott, food policy director for The HSUS. “Americans simply don’t support the lifelong confinement of animals in cages so small they can’t even turn around, and it’s both an ethical decision and good business move for Target to recognise that.”
 
The similar announcements made recently by McDonald’s, Burger King, Wendy’s, Oscar Mayer, Costco, Safeway, Kroger and more than 30 other leading food companies signal a reversal in a three-decade-old trend in the pork industry that leaves most breeding pigs confined day and night in gestation crates during their four-month pregnancy. These cages are roughly the same size as the animals’ bodies and designed to prevent them from even turning around.

[Mustang Sally Farm]

Pork Exports Holding Their Own
13 November 2012


US - September export data are in and, though 1.3% lower than last year, we are going to declare them a victory for U.S. producers and packers, writes Steve Meyer for The National Hog Farmer.

 It is not often that a year-on-year decline is good news. But we are now into the months in which exports to China-Hong Kong surged last year, so staying close is indeed a good thing in and of itself. Figure 1 shows monthly pork exports to major U.S. markets. Some highlights include:
 
Japan remains our top destination for pork products, taking 107.7 million pounds, carcass weight, in September. That figure is 10.9% smaller than one year ago and brings the year-to-date shipments to Japan to 1.04 billion pounds, carcass weight, 5.6% smaller than in 2011.
 
Shipments to Mexico, at 98.952 million pounds, were almost constant from their August levels and were 23.1% higher than last year. Year-to-date shipments to Mexico are 13.7% higher than one year ago.
 
China/Hong Kong remains our third-largest market but just barely so, edging out Canada by just 119,000 pounds in September. Monthly shipments to China/Hong Kong were 42% smaller than one year ago and will most likely be less than half of last year’s levels over the next two months. Year-to-date shipments are still 39% of last year’s level thanks to much higher exports in January through April.
 
As noted, Canada remains in a very close fourth place even though our pork exports northward were record large in September at 55.176 million pounds, carcass weight, 9.6% higher than last year. Year-to-date (YTD) shipments to Canada are now 17% larger than last year.
 
Exports to South Korea rebounded nicely in September, nearly doubling their August level. YTD shipments are still over 20% lower than last year’s foot-and-mouth-disease-enhanced levels, but usually grow seasonally through year’s end.
 
Pork variety meat exports increased by 1% vs. a year ago, while the value of those shipments increased by 21%. Those figures bring year-to-date variety meat shipments to 320,286 tons. That figure is 14% smaller than one year ago, but the value of those tons adds up to $494.353 million, 13.8% more than last year through September.
 
USDA’s Foreign Agricultural Service reports that September’s pork exports were valued at $431.758 million, nearly 9% less than one year ago. I’m not surprised by that figure given the lower hog and pork prices we saw as slaughter surged in August and September. Year-to-date, however, the value of U.S pork exports is 6.1% larger than last year at $4.034 billion.
 
The total value of pork, pork variety meat and sausage casing sales this year through September stands at $4.633 billion, 6.4% higher than last year. That figure represents $56.01/hog slaughtered from January through September.




Corn and Soybean Crop Estimates Up Slightly

And the news Friday was not bad on the cost side either. USDA estimated that the 2013 corn and soybean crops were slightly larger than previously expected (Figure 2). The changes were not large but, especially in the case of soybeans, were large enough to make a difference in futures prices. Soybean meal was down $31 to $47/ton on Friday and was another $12-$17 lower as this newsletter went to press. The 2012-crop corn survived Friday’s session somewhat unscathed, losing only 2-3 cents/bu., but was under significant pressure this morning with futures down 19 to 23 cents/bu.




Even with lower Lean Hogs futures on Monday, the 2013 profit outlook for pork producers continues to improve. As Figure 3 shows, the estimate for next year based on mid-morning Monday hog, corn and soybean futures is for an average loss of only $1.82/head. Yes, it is still a loss, but that is the closest we have been to profits for next year since I started computing year-long estimates back in June. The average includes six profitable months (May through September) with the summer months being $11 to $16/head in the black. Fall 2013 losses, at present, are still around $8.50/head, but those figures will improve markedly if next year’s crop develops well.




 As published in National Hog Farmer's Weekly Preview.

[Mustang Sally Farm]

CME: Sow Slaughter Stays Down
28 November 2012

 

US - Recent weeks have seen sow slaughter fall to the extent that figures for one week were 9 per cent down on last year, reports the CME group.

What about that “worldwide bacon shortage” and expected massive sow herd liquidation? We all know that the “shortage” idea was overblown from the beginning but what about the latter? We doubt that the possibility of a large reduction in the breeding herd and lower hog supplies in late 2013 is zero yet but the probabilities are, in our opinion, getting lower with each passing week.

Sow slaughter has certainly slowed since early October, falling far short of year-ago levels in 3 of the past 4 weeks for which actual slaughter data are available. The most recent of those, the week of November 9, saw sow slaughter of 64,190 head, only 0.8 per cent larger than the same week in 2011. The previous three weeks’ sow slaughters were 2.2 per cent, 4 per cent and 8.9 per cent lower than last year.

Figure 1. shows sow purchases reported under mandatory price reporting to capture the past two weeks.



Figure 1.
 These data imply slaughter that was 7.6 per cent lower, yr/yr, the week of November 16 and then 6.9 per cent higher than last year last week. The reason for the +7.6 per cent in a week when sow purchases were up only 2.4 per cent, yr/yr, is that the purchases-to-slaughter differential has been consistently larger than it once was since March 1. We add this larger differential to the purchase data to estimate sow slaughter for the past two weeks.

 None of these add up to sow liquidation of any large amount. The fact that gilts represented only 48.2 per cent of total barrow and gilt slaughter from October 1 through November 10 adds to our thoughts that the herd is not being reduced.

 That average would, in fact, suggest expansion if it went on for any significant period of time.

 An increase to 50.8 per cent for the week of November 19 pretty well quashes any “expansion” thinking but in and of itself does nothing to suggest liquidation. It would take several weeks of higher percentages to do that. And there is good reason from the profitability side to conclude that most producers will be able to hang on. Our current projected average loss for cash-buying and cash-selling Iowa farrow-to-finish operations is just over $9/head — nothing to write home about but not nearly the kinds of losses seen in 1998-99 or 2007-2008.




And the projected losses for next year have fallen from nearly $20/head back in August to only $3.19/head as of Monday morning. They were near only -$1/head two weeks ago. That -$3.19/hd average for 2013 includes profits from May through August with the June projection currently +$14.96/head. So what kind of reaction should we expect?

The U.S. sow herd has become more and more stable over time with both expansions and contractions being smaller in percentage magnitude.

 The huge losses of 1998-99 drove December-to-December sow herd changes of 4 and 6.7 per cent.

Those reductions, though, included the major portion of the massive structural change that occurred in the 1990s and 2000s. More indicative for a “stable-structured” sector is the 2.7 and 3.5 per cent reductions of 2008 and 2009 but these were also driven by a major structural shift — this time in the grain complex.

By contrast, this year’s losses are the result of no permanent structural change that we can see. It’s a short crop situation that will be rectified by normal weather next year. Whether that happens remains to be seen. We don’t expect the December 1 breeding herd to be more than 1 per cent lower, yr/yr, and we doubt the reduction will be that large. And next year’s change may not be negative at all, depending on what happens with the 2013 crop.